RIL invests Rs 14,000 crore more in unlisted arm

RIIH setting up Jio-related infrastructure, new ventures

India's largest private sector firm, Reliance Industries Ltd (RIL), has invested a massive Rs 14,000 crore in its unlisted subsidiary - Reliance Industrial Investments and Holdings (RIIH) in the financial year 2016 - making it the largest investment vehicle after its wireless telephony company, Reliance Jio.

RIIH, which made a modest profit of Rs 3.42 crore on income of Rs 961 crore in the financial year 2016, has, in turn, invested in several businesses, including commercial land, IPL team and Jio-related infrastructure apart from making strategic investments, as per Reliance Industries' latest annual report.

A RIL spokesperson did not reply on questions sent on the increased investments made into the subsidiary and on returns on investments.

In fact, RIL's standalone investments in its subsidiaries, in the form of equity, preference shares and debentures, increased to Rs 81,400 crore as of March 31, 2016 from Rs 43,800 a year ago mainly due to Rs 15,000 crore of equity infusion in Reliance Jio apart from Rs 14,000 crore of incremental investments in Reliance Industrial Investments and Holdings, say analysts.

The company is planning to further infuse Rs 15,000 crore of equity in Reliance Jio through rights issue in the current financial year. At the same time, RIL's loans and advances to subsidiaries declined to Rs 14,400 crore from Rs 26,200 crore a year ago. The net debt of the company rose as the company borrowed Rs 28,000 crore to fund new projects.

In the last three years, RIL has incurred one of corporate India's largest-ever investment exercise with $38 billion (Rs 250,000 crore appox) of net capital expenditure. This includes $17.5 billion (Rs 117,000 crore) in core business of refining and petrochemicals, $ 7 billion (Rs 46,900 crore) in upstream exploration and production business, including $3 billion (Rs 20,000 crore) in US shale gas joint ventures and $18 billion (Rs 20,000 crore) in non-core businesses like telecom. The company has additionally capitalized $7 billion (Rs 46,900 crore) related to forex loss and interest costs, as per an analysis by Kotak Institutional Equities Research.

Most of these investments are now reaching its end and the company is expected to reap the returns on these investments in the coming years, say analysts. The returns from its shale gas investments however turned negative as the crude oil price crash made shale gas exploration uneconomical. With the company planning a nation-wide rollout of its Jio telecom network, it is expected to start earning from this fiscal onwards but analyst do not expect the company to make profits in the near future due to high investment made in setting up the world class telecom infrastructure.