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    Categories: Finance

How Mukesh Ambani made Reliance Industries Debt free?

Reliance Industries created history by becoming India’s first Trillion dollar company. It raised around 1.68 Lac Crore in less than 2 months entering the top 60 global companies. With a net worth of $150 Bn RIL has now surpassed some of the major Multinational Companies(MNCs) like McDonald’s($139bn) and Nike($149bn). But this is not it, Did you know that if Reliance Industries was a whole country it would be the world’s 59th richest!

Its net worth as of now is more than many countries’ GDP, such as Kuwait, Sri Lanka, Mauritius, Myanmar, and more. Fascinating isn’t it? This recent growth also led to Mukesh Ambani replacing Google co-founder Larry Page to become the 9th richest person in the world.

So, how did Mukesh Ambani manage to reach this pinnacle, that too amidst a Global Pandemic? This was made possible via a rights issue by the Company and a stake sale of 24% equities to the Leading Global Investors. Let’s look at the timeline to get an in-depth view of it.

12 August 2019- Mukesh Ambani promised a Net Debt-free Company in 18 months

Chairman and Managing Director of Reliance Industries Mr. Mukesh Ambani at RIL’s 42nd Annual General Meeting said “We have a very clear roadmap of becoming a zero net debt company within the next 18 months i.e 31st March 2021.” He further added that the company is receiving strong interest from strategic and financial investors in the consumer businesses, Jio, and Reliance retail. He expressed that with these initiatives, Reliance Industries would have one of the strongest balance sheets in the world.

22 April 2020- The Facebook Jio Deal

The social media giant announced an investment of Rs. 43,574 Crore accounting for a 9.99% stake in Jio platforms. This deal made Facebook the largest minority shareholder in Reliance industries. Mr. Ambani claimed that this deal would help realize Prime Minister Narendra Modi’s ‘Digital India Mission’.

1 May 2020- BP-Reliance Petroleum

British Petroleum(BP), A Multinational Oil and Gas company announced an investment of Rs. 7000 Crore back in August 2019 which later got approved by the Indian Government on the said day. The funds are to be used to set up a countrywide service station network and Aviation Fuel Marketing Business. 

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8 May 2020- Vista Equity Deal

US Based private equity firm Vista Equity bought a 2.32% stake in RIL’s telecom and technology company, Jio Platforms for Rs. 11,367 Crore. This marked for the Texas-based tech-focused firm’s largest investment outside its home country and the first in Asia. This deal made Vista the second-largest stake owner after Facebook.

17 May 2020- General Atlantic Deal

Private Equity firm General Atlantic acquired a 1.34% stake for an investment of Rs. 6598 Crore.

22 May 2020- KKR Deal

KKR invested Rs. 11,367 Crore for a 2.32% stake. It was the largest investment of the Global Private Equity firm in Asia and was made via its Growth Technology Funds. KKR has a history of investment in Tech Companies in India since 2006.

5 June 2020- Mubadala Deal

Abu Dhabi sovereign fund, Mubadala Investment company invested Rs 9093 Crore in exchange of 1.85 % equity in Jio. This Deal resulted in Jio becoming the 4th biggest company in India, surpassing Hindustan Unilever.

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12 June 2020- The Rights Issue

Reliance raised Rs 53,124 crore from its investors by releasing a Rights Issue. A Rights issue refers to a company’s offer to its existing shareholders to buy additional shares at a discounted price, which in this deal was 14% per share. This step proved to be a major game-changer for the company as it became the biggest rights issue in the last decade in the world by a non-financial entity, and the biggest ever in India. The shares were available at Rs. 1257 in the ratio of 1:15 i.e a shareholder can subscribe to 1 share per 15 shares held. It got subscribed 1.59 times embarking a success on the whole deal.

13 June 2020- The TPG Deal and L Catterton Deal

On the next day itself, RIL announced two deals. One with another US-based Equity firm, TGP an investment of Rs. 4546 crore at an equity value of 4.91 lac crore and Enterprise Value of 5.16 lac crore for 0.93% of equity. And another with L Catterton. This, one of the largest consumer-focused PE Company invested Rs. 1894 Crore in Joint Point Leads (JPL) in the Jio platforms in exchange for 0.39% equity stake in the Company.

And finally, the record-breaking 11th deal which led to the company officially becoming net debt-free was on…

18 June 2020- The PIF Deal

Like the Mubadala Deal, RIL struck with another Oil producing country, Saudi Arabia. The country’s Public Investment Fund(PIF) announced an investment of Rs. 11,367 crore for a 2.32% stake in the Company. The PIF is among the largest sovereign wealth funds in the world.

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19 June 2020- RIL announced to be Officially Net Debt-free

The historic announcement stirred people globally as Mukesh Ambani made Reliance industries Debt-free 8 months ahead of its deadline. The company had an existing debt of Rs. 161,035 Crore as of March 2020. The cumulative investment deals and the money raised from the Rights Issue helped the company in achieving this milestone.

Shares of RIL rose more than 2% to hit a fresh lifetime high after the company made the announcement. It is now up 13% since the beginning of the year. Indeed, a great achievement!

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What Next? The Road Ahead

“It is an amazing lockdown achievement” said Chakri Lokpriya Chief Investment Officer at TCG Asset Management in Mumbai. She further added that this move conveys that the company is transforming into a technical platform. It is quite clear that Reliance Industries Ltd is on a Titanic, of course with no icebergs in the near future. It is expanding and reaching its wings to every possible sector. For instance the recent launch of JioMart (an Online Grocery Delivery service). Apart from this RIL is witnessing rapid growth in the telecom space as well.

Mr. Ambani shared his ambition of listing the company’s telecom and retail arms in the stock exchange in the next 5 years. With this speed, it would not be surprising to see the company become the largest conglomerate in the world one day. Don’t you think so?

What’s your take on it? Achieving a zero debt dream isn’t that easy! Is there something that big and small businesses can learn from it? Feel free to discuss.

Ashwin Jain:
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