Reliance Industries may break up in the next three-four years after the initial public offering of its telecom and retail business segments, which should unlock additional shareholder value, said Bernstein Research.
“Following the rights issues and 24.7% sell-down in Jio, RIL is now effectively debt-free. We expect a break-up of the company in the next three-four years through the IPO of Jio and retail business segment which should further unlock shareholder value,” it added.
On 19 June, RIL said it is a net debt-free company, after having raised ₹1.75 trillion, against its net debt of ₹1.61 trillion. The company had raised ₹1.15 trillion through a 24.71% stake sale in Jio Platforms to nearly a dozen investors, and ₹53,124.20 crore through a rights issue, which was subscribed 1.59 times. It had also sold a stake in the petro-retail JV to BP for ₹7,000 crore.
Looking at the company’s balance sheet, Bernstein’s analysts said RIL has significantly improved its financial position following these transactions, and its net debt-to-equity will fall significantly from 0.51x in FY20 to 0.06x in FY21, which is the lowest in almost a decade.
Given the $15 billion Aramco deal and free cash flow outlook over the next several years, net debt-to-equity could continue to fall beyond FY21, it said. RIL is in talks with Aramco to sell a 20% stake in its oil-to-chemical business for $15 billion.
This article was first published on livemint.com.