Reliance Industries has raised around Rs.29000 crore in the October – December quarter, the big question is, “what for?”
In October, just a few weeks before the company started raising this debt, it received a cash infusion of Rs16,824 crore from its owner and promoter Mukesh Ambani, through the conversion of 120 million share warrants into equity at Rs1,402 a share.
In last weeks of November and early weeks of December, RIL has raised around Rs12,000 crore in debt, according to some analysts.
Along with the above Edelweiss Capital Ltd and JPMorgan Chase and Co arranged 3000crore through NCDs, ICICI bank and axis bank 1000crore each and the remaining from debt market accounting 7000crore.
Why RIL need such large money?
The most probable answers are the following,
1. Money for future projects (Jamnagar refinery and KG basin gas)
2. Making up for treasury losses incurred by trading in crude oil futures trading.
3. To fund potential acquisitions
4. Company is anticipating worse times ahead and finding this fact RIL is raising the funds well in advance when raising money could be harder.
The first one: The normal answer from any RIL spokesperson will be the first one because they invested mostly equity in both jamnagar refinery and KG basin and they are putting some money through the debit route.
The third one: No need to describe because RIL officially stated in their announcements that they are withdrawing from several new ventures and acquisitions.
The fourth one: There could be a chance for this also but for RIL as a India’s biggest market cap company with good track record, rating will suffer to raise money in the future despite of the anticipated worst.
But, the most possible answer is seems to be the second one. The company is believed to have booked heavy losses because it bought crude oil futures at higher prices. Crude prices fell 72.88% this year after reaching a high of $147.27 in mid-July.
Then it has to be observed how much loss it has. October – December Q3FY09 quarterly results would tell the fact.
Conclusion: The results will be below expectations and a big jolt likely to come.
With thanks
Be and make
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