Insights on Reliance being debt-free

Insights on Reliance being debt-free

The odd scenario of the market lockdown in the nation barely lets any good or descent news reach our ears. And today, the story of Reliance being debt-free has made us all curious. Yesterday, Mukesh Ambani, the chairman of Reliance Company, announced that Reliance Company, which had a debt of Rs. 161035 crore on 31st of March 2020 has now become debt-free. After this news hitting up the media, the share price of the company rose by 6.48% and is now presently available at Rs. 1763.20. The stakes of the Jio platforms were sold to different investors. Few big names amongst the investors are Facebook, Mudabala Fund, General Atlantic, Silver Lake, KKR.

Remarkable Achievements of the company:

The company has also brought the right issue, which is seen in India for the first time under which Rs. 53124 crores were raised. The price of the shares of Reliance Company was somewhere at Rs. 1350 by the 22nd of April, but the same is now seen elevated for Rs. 1763. It’s just two months, and the price has shown an incredible ascent of 30%. And due to this, the market capitalization of the company has been elevated above $150 Billion.  With this, Reliance also becomes India’s first company to cross the market capitalization above the mark of $159 Billion. Due to the rise of the share price, the net worth of Chairman Mukesh Ambani becomes $64 Billion. His name can now be found in the top 10 rich people in the world.

The company so far has bravely bounced the challenge of being debt-free. But many other problems are waiting for it. Some of them will be discussed in the article further.

Performance of the company in the FY 2020

The consolidated revenue of the company this financial year summed up to be Rs. 659205 crores which have relatively grown by 5.2% as compared to the previous year. More than 50% of the company’s revenue is generated by refining and marketing petrochemical oil and gas. And other taxes are collected from the retail, digital, and media businesses of the company. If we make a comparison of the net profit of the company in FY 2019 and FY 2020 then, Fy 2020has a net profit of Rs. 38937 crore, which is 0.1% more than that of the net gain in FY 2019, which was Rs. 39818 crore. Analytical study of the performance of the company indicated that the oil and petrochemical business had not been quite amazingly performing. The massive growth in revenue has been seen as a result of the incredible performance of the digital marketing of the company, which is popularly known as Reliance Jio.

A Saudi Arabian giant names Saudi Aramco is planning to invest in the Reliance industry of petrochemical oil and gas. The due diligence is the reason why the deal is on a delay. But this is the contract that is about to take place shortly. The wittier part of the whole thing is that Mr. Ambani already sensed the retardation in the growth of oil and petrochemical business which is why he slowly shifted the core of his business to the digital field. He started with a telecom business in the area, and the company is now putting out amazing technologies one after another.

Analyzation of the potential business segments

Reliance Company has two potential business segments, namely- reliance Retail and Reliance Digital.

The revenue of the Reliance retail summed up to be Rs. 162936 Crores in the financial year 2020, which happens to be 24.8% more than that of the revenue generated in the fiscal year 2019, which was Rs. 130566 Crores. There are 11784 stores of Reliance retail spread all across the nation. It sells electronic products through Reliance Digital and groceries are dealt through Reliance Fresh. It was in recent times that Jio mart had started its E-commerce venture to fulfill the gap in the pandemic situation. The Jio Mart has made its service available in 200 cities of India as of now. The broader planning consists of spreading the service to all the cities of the nation. The current investment of Facebook on the Jio platform is measured to be a strategic one. This is very clear that Mr. Ambani wants to spread his Jio business through WhatsApp. Hence, Jio Mart is probably to be integrated with WhatsApp with the help of which people would be able to access the nearby shops and get their dailies. This will be operated by WhatsApp and Jio Mart.

Reliance Digital services mainly comprise of Jio. The revenue of the digital service wing in FY 2020 totaled to be Rs. Sixty-eight thousand four hundred sixty-two crores which elevated by a rate of 40.7%  relative as compared to the revenue collected in FY 2019, which happened to be Rs. 48660 crores. If we discuss the subscribers of the Reliance Digital wing, then in the FY 2019, the total subscribers were about 30 Crore 67 Lakhs people, but in the FY 2020, the subscribers increased to be 29 Crore 75 Lakhs. The net profit is again another discussable aspect. The wing benefitted a net profit of Rs. 5562 crores in the FY 2020 which is increased by a whopping rate of 88% when compared to the net profit in FY 2019 which was 2964 Crore

Final Words:

The challenges that await the company is quite evident from all the above analysis. Most of the revenues of the company are collected by the petrochemical, oil, and gas wing, but the business is not showing appropriate growth.  This is an important matter that the company has to look into. Moreover, the company has to constantly search for newer and better sources of revenues to keep on touching heights as it is doing.