Flourishing cash pile to shore up RIL’s upcoming investments

Standing on a well-heeled cash pile of nearly $17 billion, Reliance Industries Limited (RIL), India’s largest private sector enterprise on the basis of market capitalization, may just find its cash resources increasing by approximately $ 10 billion by March 2012, putting the corporate giant in a comfortable position to support its coming, ambitious investment projects.

Mukesh Ambani led Reliance Industries will see a major boost in its cash reserves as a result of the payment of remaining stake-sale proceeds from BP Plc and its strong operational cash flow, as anticipated by global investment banking major UBS.

RIL had cash and cash-equivalents of $9.5 billion as on 31st March this year, which was nearly double the level it accounted last year. Since then, Reliance has seen its cash reserves increase on the back of sale proceeds from the deal its signed with London base energy major BP PLc earlier this year. RIL has already received a payment of $7 billion in August and a balance payment of $3.2 billion in October from BP for 30 per cent stake in RIL’s 23 oil and gas blocks. Moreover, with a $7 billion strong treasury in place and growing operational cash inflow, Reliance Industries can expect to see its cash pile increase to around $25 billion.

Mukesh Ambani had expressed earlier on at AGM 2011 that the company will find itself debt-free on a net cash flow basis in the current fiscal. And this ambitious pursuit is expected to be realized by first quarter of 2012. With affluent cash reserves in place, Reliance Industries can be expected to drive this cash into its budding core energy assets, new businesses and a potential buy-back of shares. This could prove a positive boost for its stocks as well, says UBS. What will act as catalysts to RIL’s aspirations, as per UBS, is the tangible sight of value creation from developments in sectors like retail (with the government allowing foreign direct investment in retail) and its SEZ land assets.


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