Reliance lends Rs 14,000 cr interest free loan to subsidiary

RIL says loans used to invest in new businesses like retail, land and EIH

Reliance Industries has lent a massive Rs 17,300 crore to one of its subsidiary – Reliance Industrial Investments and Holdings Ltd to make investments in land, retail and other "developing" businesses like EIH Ltd. Of this, a tranche of Rs 13,944 crore has been lent to the subsidiary as an interest free loan which has attracted the attention of its auditor.

When contacted, a company official said these funds have been allocated to the subsidiary to make investments in all those businesses which are in the “developmental stage” and require initial capital to start the business. This includes investments in retail, a Dubai firm with interests in oil and gas sector and a land company.

Indiawin Sports Private Ltd,  owner of the Mumbai Indians IPL team, is also one of the company in which Reliance Industrial Investment has made investments in shares, the annual report says. This company has also invested in the preference shares of Reliance Jio Infocomm Ltd and in Reliance Industries Investments & Holdings Ltd.

The loans to the subsidiaries have attracted the attention of the auditors. “The company has given loans to two subsidiaries.  The auditor says the maximum amount outstanding at any time during the year was Rs  20,316 crore and the year-end balance is Rs 18,226 crore (including interest free loan of  Rs 13,944 crore).  

“In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of the loans given by the company, are not prima facie prejudicial to the interest of the company,” the auditor says.

The annual report says the subsidiary has total assets of Rs 19,646 crore and total liabilities of a similar amount. It has made an investment of Rs 2705 crore and the company’s total income is Rs 680 crore while it made a loss of Rs 11.98 crore.

In the annual report, Reliance Industries also informed its shareholders that it has written off Rs 50 crore of investments in the cargo airliner floated by Capt Gopinath which later closed down.