Mukesh Ambani's personal companies reduce debt by selling assets

It’s not only Reliance Industries, a listed company. Mukesh Ambani's personal companies too are reducing their debt by selling assets and transferring loans.

In November last year, rating firm CRISIL warned Ambani-owned Reliance Industries Holding Private Ltd (RIHPL) had a debt of about Rs 22,000 crore as of March 2018, showing relatively high gearing reflected in its adjusted debt and adjusted net worth of about 1.6 times.

Unlisted RIHPL’s subsidiaries run a large port project in Jamnagar, and 2,200 Mw power projects near RIL facilities in Jamnagar, and Hazira.

Till recently, an RIHPL subsidiary owned a gas pipeline connecting the Andhra coast to Bharuch in Gujarat.

Bankers said as part of its debt reduction plan, Canada’s Brookfield-sponsored India Infrastructure Trust (InvIT) acquired the pipeline for Rs 13,000 crore from East West Pipeline Ltd, an RIHPL subsidiary, and all the liabilities are now off the subsidiary’s books. The INvIT will service the debt of the pipeline company.

Besides, in June last year, East West Pipeline had also demerged its investment division to another RIHPL subsidiary — Sikka Ports & Terminals Ltd, which resulted in transfer of another Rs 3,500 crore of non-convertible debentures to the latter.

Data submitted to the stock exchanges show that by March this year Sikka Ports & Terminals Ltd had Rs 13,000 crore of debt while Jamnagar Utilities and Power Private Ltd had debt of Rs 7,534 crore – taking the total debt to Rs 20,500 crore.

An email sent to RIL did not elicit any response till going to press.

Interestingly, RIHPL also owns 75.4 crore Reliance Industries shares with a market value of Rs 1.04 trillion as on Friday – giving it the necessary financial muscle to build large scale projects and to raise additional debt, if need be.

The debt reduction by RIHPL comes at a time when Reliance Industries is in talks with Saudi Aramco to sell around 25 per cent stake in its refining and petrochemicals businesses for $10-15 billion and use the proceeds to reduce its debt worth Rs 2.87 trillion and invest in its new age digital business.  

RIL is also in talks with Softbank to part of its stake in its telecom arm, Reliance Jio to raise another $2-3 billion.

Going forward, analysts said Sikka Ports & Terminals (SPTL), which operates captive port facilities for receipt, handling, storage and evacuation of crude oil as well as petroleum products of Reliance Industries, is expected to better its performance in fiscal 2019 as compared to the profit of Rs 591 crore reported on March 2018 on revenues of Rs 4,139 crore.

At the same time, Jamnagar Utilities & Power Private Ltd, which gets an assured revenue and sufficient cash flow from RIL, will increase its profitability in the fiscal 2019 due to ramp up in electricity generation.

In fiscal 2018, the total operating income of the power generation company was up by 48 per cent to Rs 4,209 crore in fiscal 2018 — mainly due to commissioning of three new plants commissioned during FY17.  Its net profit was Rs 178 crore in the same fiscal.

The Debt Reduction Plan

• Sale of pipeline asset
• Transfer of NCDs to Sikka Port
• Transfer of NCDs to Sikka Port
• Ramp up power generation
• Improved profitability margins