It is shocking, in fact, very surprising to know that Mukesh Ambani, one of the world’s richest man, who is basically known for expanding his business, has gone for a stake dilution in his business. At the last annual general meeting of the shareholders of RIL (Reliance Industries Limited), Mukesh Ambani, the chairman, said that he will sell 20% of its stake in oil and petrochemicals business to Saudi Aramco for Rs. 5.3 lakh crore.
RIL has always been known for its big investments in various fields of business. Such huge investments lead to huge debt which is of Rs. 2.87 lakh crore at the end of 2018-2019. RIL has Rs. 1.33 lakh crore cash in hand and a debt of Rs. 1.54 lakh crore. It has invested Rs. 5.4 lakh crore in various business sectors of which Rs. 3.5 lakh crore has been spent in building Jio and Rs. 1 lakh crore in the petrochemicals business.
From the previous year, the RIL’s finance cost has risen from Rs. 8052 crore to Rs. 16495 core. In its annual reports, RIL said that the high rise was due to its investment in the digital services, petrochemical projects at Jamnagar and higher loan balances.
The slowing economic rate of our country is also affecting RIL’s business. From the past seven quarters, the refining margin is shrinking which has taken the crude prices for a toll. Even if RIL is making a huge amount of profit in any of the sectors, the amount of debt it has cannot be paid off. For instance- in 2018-2019, RIL’s telecom industry made a profit of Rs. 2,964 crore which still leaves the debt remains unpaid. Seeing so much of unpaid debt, it seems to be the right time for RIL to tighten its socks and pare the debts it has.
India, being a consumption-led economic country is an attractive place for the Saudi Arabians to market here and import oil in large amount.