New Delhi, Nov 13: Billionaire Mukesh Ambani-led Reliance Industries' cash reserves may rise to $ 25 billion (about Rs 1,25,000 crore) by March 2012, putting the corporate giant in a comfortable position for investments in existing and new businesses, a report has said.
In an equity research note on Reliance Industries Ltd (RIL), global investment banking major UBS has said that the company's cash reserves were set for a major boost from the payment of remaining stake-sale proceeds from BP and its strong operational cash flow.
RIL's cash reserves stood at $ 14 billion in the second fiscal quarter, ended September 30, 2011.
Subsequently, RIL received a balance payment of $ 3.2 billion in October from BP for an stake sale in energy blocks.
After taking into account the capital expenditure of about $ 4 billion, RIL's cash reserves were expected to grow to $ 18 billion by March 31, 2012, largely due to payments from BP and operational cash flows, UBS said.
Additionally, RIL's treasury stock worth about $ 7 billion could further boost its cash reserves to $ 25 billion by the end of this fiscal, it added.
Addressing the shareholders at the company's Annual General Meeting in June this year, Chairman Mukesh Ambani had said that RIL would become debt-free on a net cash flow basis in the current fiscal.
RIL had outstanding debt of Rs 67,397 crore ($ 15.1 billion) as of March 31, 2011, as against Rs 62,495 crore ($ 13.9 billion) a year ago.
At the same time, RIL had cash and cash-equivalents of Rs 42,393 crore ($ 9.5 billion) as on March 31 this year, which was nearly double the level seen a year ago.
Since then, its cash level has grown substantially, largely due to the stake-sale proceeds from global giant BP. RIL completed sale of 30 per cent stake in its 21 oil and gas blocks to BP in August for over $ 7 billion.
There have been a lot of speculations in the market in recent months about how RIL would utilise its huge cash pile and concerns have been raised in some quarters about the limited clarity on the same.
UBS said that RIL's net-cash balance was a matter of comfort, "contrary to the market's concern, particularly in the current tight liquidity environment."
A lack of visibility on RIL's cash strategy and potential return on investments in non-core businesses like retail, telecom, insurance, hotels, and SEZs has been a dampener on its stock performance and investor sentiment, it said.
However, an efficient use of cash in growing RIL's core energy assets, new businesses and a potential buy-back of shares would be a positive for the stock, UBS said.
