Reliance offers Amazon $20-billion stake in retail arm: Report

 Mukesh Ambani-led oil-to-telecom conglomerate Reliance Industries Ltd (RIL) is offering to sell roughly $20 billion worth of stake in its retail arm, Reliance Retail, to Amazon, BloombergQuint reported on Thursday, citing Bloomberg News. Amazon has held talks about investing in Reliance Retail and expressed interest in negotiating potential deals, according to the report.

The shares of RIL were up 4 per cent in mid-day trading on the BSE. The company had earlier on Thursday become the first listed Indian firm to cross $200 billion in market capitalisation.

Amazon did not immediately respond to a Reuters request for comment, while RIL did not immediately return an email seeking comment.

The report comes a day after RIL announced that US private equity firm Silver Lake Partners would buy a 1.75 per cent stake in Reliance Retail for Rs 7,500 crore. It was also reported that KKR was in advanced talks to invest at least $1 billion in the company.

ALSO READ: Silver Lake's Rs 7,500 cr investment in Reliance Retail sets stage for more

In yet another report of likely investment in Reliance Retail, West Asian sovereign wealth funds, including the Abu Dhabi Investment Authority (ADIA) and Saudi Arabia's Public Investment Fund (PIF), are said to in talks to buy stakes in the company, according to the Financial Times.

ADIA is reported to be in discussions to invest about $750 million at a valuation of roughly $57 billion, while PIF could funnel as much as $1.5 billion into Reliance Retail.

ALSO READ: Middle East funds eye stakes worth over $750 mn in Reliance Retail: Report

The reported deals and likely investments follow Reliance Retail’s acquisition of Future Retail’s grocery and apparel business for Rs 24,713 crore to expand its share of the market. The acquisition is estimated to take its market share to 38 per cent of the organised grocery retail from the earlier 22 per cent.

ALSO READ: Fitch places Future Retail on rating watch positive on sale to Reliance

RIL revenues decline 2.5% in Q3; Reliance Retail, Jio boost profit

MukeshAmbani-controlled Reliance Industries’ (RIL’s) good performance in its new-age digital and retail businesses compared to the traditional oil and petrochemicals has started showing in its numbers with the group announcing a marginal 3.6 per cent year-on-year (YoY) increase in RIL’s profit before tax at Rs 14,962 crore for the December-ended quarter.
On the planned sale of 20 per cent in the oil-to-chemicals business to Saudi Aramco, officials refused to comment on the timeline for its definitive agreement. “It is not a deal that will get done by March. We cannot comment on the timelines of (definitive agreement),” said V Srikanth, joint chief financial officer, RIL.

The deal is valued at $15 billion and expected to help reduce the company’s debt.
The segment profit (earnings before interest and tax, or EBIT) for the group’s digital business increased by 63 per cent YoY to Rs 3,857 crore while that of Reliance Retail Venture went up by 58 per cent at Rs 2,389 crore. On the other hand, the petrochemicals segment, which contributes the most to profits, saw a 28.5 per cent decline in its EBIT to Rs 5,880 crore and refining EBIT grew 12 per cent to Rs 5,657 crore.
RIL’s net revenues, too, were disappointing as they fell 2.5 per cent YoY to Rs 1.53 trillion, while Reliance Jio’s revenues increased 28 per cent and Reliance Retail’s 27 per cent.
RIL’s net profit for October-December 2019 increased by 13.5 per cent to Rs 11,640 crore, beating street estimates.
In a Bloomberg poll, 10 analysts estimated revenues of Rs 1.45 trillion and net income of Rs 11,435 crore for the third quarter. The company said it had reported its highest ever consolidated net profit.
Ambani, chairman and managing director, RIL, said: “The third-quarter results for our energy business reflect the weak global economic environment and volatility in energy markets.”
“Within our O2C (oil to chemicals) chain, downstream petrochemicals profitability was impacted by weak margins across products with subdued demand in well-supplied markets. Refining segment performance improved in a difficult operating environment, given our continuous focus on cost positions, high operating rates and product placement,” he added.
The decrease in RIL’s revenues is primarily on account of a 10.6 per cent decline in the oil-to-chemicals business revenues, with a lower product price realisation and 6.6 per cent fall in Brent crude price. This was partially offset by a continuing growth momentum in consumer businesses, the company said in its statement.
chartIn the refining segment, RIL reported a gross refining margin (GRM) of $9.2 a barrel for the quarter. In the previous quarter, the GRM stood at $9.4 a barrel while in the year-ago quarter it was $8.8 per barrel. “The full impact (of International Maritime Organisation regulations) has not come in yet. We expect it will eventually show,” Srikanth added. He also added it would take 12-18 months for petrochemical prices to improve. Revenues for the petrochemicals segment fell 19 per cent to Rs 36,909 crore. The company also expects the full impact of the petcoke-gasifier project to reflect in the earning for full year FY21.
Though Jio lost 22.3 million subscribers during the quarter to end with 370 million of them, primarily because of “excessively heavy voice users, owing to implementation of IUC tariffs due to regulatory uncertainty”, the digital services business reported a 36 per cent increase in revenues to Rs 17,555 crore.
Jio also became a net recipient of access charges within two months of implementing inter-connect user charges (IUCs), while its average revenue per user (ARPU) stood at Rs 128.4 (including IUCs), up marginally from Rs 127.5 in the previous quarter.
Reliance Retail also posted robust YoY revenue growth of 27 per cent to Rs 45,327 crore.
The company’s debt was at Rs 3.06 trillion in Q3, against Rs 2.87 trillion in March 2019. Its net debt for the company as of December 2019 was at Rs 1.53 trillion. “Intensity of capital expenditure has been coming down quarter on quarter,” Srikanth said.
He added the company would look at refinancing debt as a natural course of business.
The board of directors of Reliance Jio Infocomm (Jio) approved a scheme of arrangement between certain classes of its creditors, including debenture holders, for transferring identified liabilities of about Rs 1.04 trillion for an equal consideration to the parent company. Jio has sought the National Company Law Tribunal’s approval for the transfer.
Exports (including deemed exports) from RIL’s India operations were lower by 13.7 per cent at Rs 53,804 crore ($7.5 billion) as against Rs 62,378 crore in the corresponding previous period due to lower price realisation from the petrochemicals and refining businesses. Higher sales volumes of petrochemicals business products in domestic market also contributed towards reduction in exports.

RCom, subsidiaries get Rs 25,000-cr bids for their assets at CoC meet

With a bid of Rs 25,000 crore, MukeshMukeshAmbani’s Reliance Jio Infocomm and asset reconstruction company UVARC, are learnt to have emerged as the highest bidders for assets of Reliance Communications (RCom) and its subsidiaries, at a Committee of Creditors (CoC) meeting held on Monday.
According to sources, Jio, part of Reliance Industries Ltd, will pay about Rs 4,700 crore for tower and fiber assets of Reliance Infratel Ltd (RITL), while UVARC has offered to pay about Rs 16,000 crore for spectrum, real estate, and enterprise & data centre businesses of RCom and Reliance Telecom Ltd (RTL). The bidders are believed to have committed themselves to paying 30 per cent of the proceeds of Rs 7,500 crore within 90 days.

Emailed queries sent to Jio and UVARC were yet to be responded to at the time of publishing of this report.
The 38 lenders of RCom are to recover 75 per cent of the Rs 33,000-crore outstanding loans, in the highest-ever recovery of dues by financial creditors to the telecom sector, which has seen the exit or shutdown of nine of 12 operators since 2012.
In addition, lenders will claw back the priority payments of Rs 4,300 crore made to Chinese lenders (Rs 1,300 crore) and Indian ones (Rs 3,000 crore). They will start recovering the monetisation proceeds starting March 2020.
The members of the CoC will obtain their respective board approval for a final vote on January 31 to clear the resolution plans ahead of the National Comp any Law Tribunal (NCLT) filing due by February 3.
This round of recovery will also rank among the highest by way of the corporate insolvency resolution process approved by the NCLT across sectors, according to data published by the Insolvency and Bankruptcy Board of India (IBBI).

Mukesh Ambani's Reliance Retail valued at $34 billion in share swap

A stock swap offer to help shareholders of billionaire MukeshAmbani’s unlisted retail business monetize their investment has valued the unit at $34 billion.
Share owners in Reliance Retail Ltd. can exchange four shares for one of its listed parent Reliance Industries Ltd., according to a so-called scheme of arrangement posted on the group’s website. With the parent’s latest market capitalization at 9.8 trillion rupees ($137 billion), the share swap values the subsidiary at 2.4 trillion rupees, according to Bloomberg’s calculation.

Asia’s richest man is scouting for investors for the profitable retail unit. The share swap, which will help Reliance Retail employees monetize their illiquid stock options, values the company at more than Tesco Plc, the U.K.’s biggest supermarket chain. Ambani has promised to slash the group’s net debt zero to zero by March 2021 after an investment spree of $76 billion in the past five years, bulk of it on its massively disruptive telecom carrier.
“We will induct leading global partners in these businesses in the next few quarters, and move toward listing of both these companies within the next five years,” Ambani had told shareholders in August referring to the retail and telecom units.
For the year to March, Reliance’s organized retail revenue jumped 89% to 1.3 trillion rupees in the year. The earnings before interest and taxes jumped 169% to 55.5 billion rupees, according to a company statement which did not specify a net income for the business.
Reliance Retail, with 10,901 stores across the country, runs India’s largest chain of neighborhood supermarket stores and consumer electronics stores besides being the top wholesale supplier to nation’s army of small shopkeepers.
The valuation set by Reliance is double that of Avenue Supermarts Ltd., which runs India’s biggest supermarket chain. Tesco is valued at $32 billion.

Forbes India rich list 2019: Mukesh Ambani retains top spot, Adani second

Reliance Industries' Chairman Mukesh Ambani has bagged the top spot in Forbes' list of the richest Indians for the year 2019 in what the American business magazine said was 'a challenging year' for the Indian economy. This is the 12th time in a row that Ambani -- whose wealth swelled to $51.4 billion this year -- has topped the list.
"He added $4.1 billion to his net worth as Jio, the three-year-old telecom unit of his Reliance Industries, became one of India’s biggest mobile carriers with 340 million subscribers," Forbes said.

The effect of a slowing economy was visible on the list. Overall, the total wealth of tycoons on the 2019 Forbes India Rich List shrank 8 per cent to $452 billion from a year ago and more than half of India’s 100 richest saw a decline in their net worth, the magazine said.
Despite this, some tycoons saw big gains to their fortunes.
One of them is infrastructure tycoon Gautam Adani, who jumped eight spots to no.2 this year with a net worth of $15.7 billion on the back of a permission he secured after a nine-year wait to start work on an Australian coal mine. He has also ventured into a slew of new businesses from airports to data centers.
Ambani and Adani were followed by the Hinduja brothers (net worth of $15.6 billion), Pallonji Mistry ($15 billion), and banker Uday Kotak ($14.8 billion).
Naazneen Karmali, Asia Wealth Editor and India Editor of Forbes Asia, said, "While India's slowing economy took a toll on the combined wealth of the nation's 100 richest this year, there were some who defied the odds to charge ahead.. It won't be long before they bounce back."
Six newcomers made their debut on this year’s list: The Singh family (no. 41, $3.18 billion), who inherited the fortune of pharma magnate Samprada Singh, founder of Alkem Laboratories, who died in July this year; Byju Raveendran (no. 72, $1.91 billion), the 38-year-old founder of fast-rising edtech unicorn Byju’s; Mahendra Prasad (no. 81, $1.77 billion) of Aristo Pharmaceuticals; Manohar Lal and Madhusudan Agarwal (No. 86, $1.7 billion) of Delhi-headquartered Haldiram Snacks; Rajesh Mehra (no. 95, $1.5 billion), whose family owns the popular sanitary ware brand Jaquar, and Sandeep Engineer (no. 98, $1.45 billion) of Astral Poly Technik.
On the flip side, tycoons linked to autos and consumer goods suffered from weak consumer sentiment. Autoparts maker Vivek Chaand Sehgal’s net worth more than halved to $2.45 billion.

Why Mukesh Ambani's 'cautious actions' could be a bad sign for the economy

Does Mukesh Ambani see dark clouds gathering on the horizon? From his message to shareholders, it doesn't look like India's richest tycoon is worried. But his actions may reveal more than his words.
At Monday's annual general meeting, the chairman of Reliance Industries Ltd was brimming with optimism. Not only did he endorse Prime Minister Narendra Modi's vision of bumping up annual GDP by 80% in five years to $5 trillion, he even forecast a $10 trillion Indian economy by 2030. It's not only possible but "inevitable," he said.

Something doesn't add up. If the outlook is so rosy, why is Ambani hitting the brakes on a seven-year, $100 billion investment spree across refining, petrochemicals, telecom and retail? While a breather after such frenzied activity may be understandable, why does he want Reliance to be a zero-net-debt company in 18 months? What will it mean for the more than 100 banks and financial institutions around the world that provide India's largest company and its subsidiaries with billions of dollars – and yen, and rupees – in financing and refinancing? Above all, what will Reliance's deleveraging mean for India?
In retrospect, I tackled the last question prematurely in October 2016 when Reliance was shouldering 13% to 14% of the entire investment by India's top 1,250 listed companies as well as Indian Railways and state-owned electricity boards. My conclusion then was that if Ambani took a yearlong vacation, India’s growth outlook could dim. What I didn't anticipate was that starting a 4G mobile network with lifetime free voice calls and dirt-cheap data was just the beginning rather than the end of Ambani's telecom ambitions. The goal of Reliance Jio was to acquire at least half of India's 1 billion-plus mobile customers, and that required continued spending.
Now that he's reached 340 million subscribers, though, the endgame is probably not more than a few quarters away. And that’s problematic for the economy. The rest of India Inc. is paralyzed by debt and self-doubt; consumers are overstretched; and so is the government. A holiday for Reliance would remove from play the only domestic balance sheet with unspent firepower.
The investment cycle for the Jio network is complete, Ambani told shareholders. In other units, too, there's little left to do. Ambani is selling 20% of the family jewel – Reliance’s refining and petrochemical operations – to Saudi Arabian Oil Co. even though the goal is more strategic than just shedding debt. As my colleague David Fickling wrote, the $75 billion enterprise value at which Aramco is investing is a lot higher than the business is worth. Saudi Arabia wants takers for its surplus oil in a world of electric vehicles, and if Reliance’s refinery can provide a profitable outlet for 500,000 barrels per day of Saudi crude by converting it into jet fuel and polymers, then Ambani is doing the right thing by taking Aramco’s money.
A $22 billion reduction in net debt (to reach zero) will require more than Aramco’s cash. Reliance has shoved some borrowings into an infrastructure trust together with telecom tower and fiber assets. It's also taken on BP Plc as a partner in Indian fuel retailing and oil exploration. If Ambani finds deep-pocketed partners for general retail, as well as for telecom, reaching his goal will be simple enough. Banks, however, will rue the end of his debt-fueled expansion if loan syndication deals are only for refinancing and not new money.
As for shareholders, Ambani is telling them that hitting zero net debt will come with higher dividends, bonus issues and other goodies “at a more accelerated pace than any time in our history.” But investors will struggle to reinvest the cash returned by Reliance. For one thing, India’s slowdown is deepening. For another, the company’s digitization blitz is causing unpredictable disruption. A day after Reliance told shareholders that they could watch movies on their new home broadband the same day as the cinema release, shares of PVR Ltd., India’s biggest theater exhibitor, fell more than 8% intraday.
Several Indian business leaders have sounded the alarm on the Indian economy’s increasingly choppy waters. While Ambani may or may not share their concerns, his cautious actions can only serve to bring the storm closer.