RIL’s Free Cash Flow Falls To Its Lowest In At Least 11 Years

Reliance Industries Ltd.’s free cash flow fell to its lowest in at least 11 years as its capital expenditure rose and the company took more time to convert investments in inventory into cash.The Mukesh Ambani-controlled oil-to-telecom conglomerate’s free cash flow fell to negative Rs 1.10 lakh crore in financial year 2018-19, the worst since at least FY09, according to Reliance Industries’ annual report reviewed by BloombergQuint..BoombergQuint’s emailed queries to Reliance Industries remained unanswered.The cash situation worsened on acquisitions and investments in its digital business, including the telecom unit, and a decline in payable days—it paid vendors in 70 days compared with 100 in FY18.The capital expenditure of India’s most-valued company jumped 67 percent in the last financial year to more than Rs 1.32 lakh crore—the highest in at least 11 years. More than half of this was spent on Reliance Jio Infocomm Ltd., and the rest on refining, petrochemical, retail and other businesses..Q1 Results: Reliance Industries’ Profit Rises, Margin Narrows On Petrochemical Woes.Other expenditure also includes Rs 10,000 crore spent on acquiring stake or increasing investments in close to 13 companies..Despite a growth in profit in FY19, the company’s cash flow from operations declined to Rs 45,736 crore from Rs 71,459 crore as it now pays vendors earlier.Though the cash-conversion cycle—time to convert investments in inventory into cash—remained negative, it worsened from 27 days to 8 days. The cash-conversion cycle is a net of time taken to sell inventory, collect payments from clients and pay vendors. A negative value on the higher side is better for a company as cash stays with it for longer..RIL’s borrowings worth Rs 80,621 crore are due for repayment in the ongoing financial year. That is nearly 1.7 times the average cash flow it generated from operations in the last five financial years.If the company fails to generate enough cash to repay its debt, it will either have to refinance debt or sell stake in assets to repay the debt. Total borrowings up for repayment in FY20 are 7 percent higher than the previous fiscal..Consolidated debt of the oil-to telecom conglomerate rose because of higher capital expenditure on Reliance Jio. The company, however, kept its leverage unchanged at 3.4 times, cushioned by higher contribution from its consumer and petrochemical business..Decoding Reliance Industries’ Transaction With Brookfield And Its June-Quarter Earnings.In a move to reduce debt, Reliance Industries announced monetisation of its tower and fibre assets. But hiving off these assets into infrastructure trusts couldn’t lower its debt.Last week, the company said Brookfield Asset Management along with other investors will invest in Tower Infrastructure Trust, which could reduce its debt by Rs 12,105 crore..Brookfield To Invest Rs 25,000 Crore In Reliance’s Tower Trust

RIL’s Free Cash Flow Falls To Its Lowest In At Least 11 Years

Why RIL’s free cash flow has fallen to its lowest in at least 11 years.

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