Reliance Industries Ltd (RIL) expects to become a debt-free company by the end of the current financial year. This is because its cash balance will swell after it receives the payment of $7.2 billion from BP from the stake sale in various gas blocks.
“Reliance will be completely debt free, net of cash balances within this year,” the Chairman, Mr Mukesh Ambani, told the share holders at the company's 37th Annual General Meeting.
The company had an outstanding debt of Rs 67,397 crore as of March 31, 2011, as against Rs 62,495 crore a year ago. For the same period, the company's cash and cash equivalents stood at Rs 42,393 crore.
“Our company is in a very strong position financially,” said Mr Ambani.
As part of its deal with BP, RIL will receive $7.2 billion (Rs 32,400 crore) for selling a 30 per cent participating interest in its 23 oil and gas blocks including the Krishna Godavari D6 basin.
In addition, performance payments of up to $1.8 billion will follow based on future exploration successes.
“All these reflect a robust financial position and a sound balance sheet,” said Mr Ambani.
Notwithstanding the announcement about becoming debt-free, RIL's scrip fell 1.7 per cent on the BSE on Friday to close at Rs 934.60.
No Explanation for KG D6 output fall
The RIL Chairman failed to indicate what the company will do to stem the production fall from the KG D6 basin.
“After the Government approvals for the BP-Reliance partnership, the KG D6 reservoirs will be jointly assessed to address the technical issues in ramping up production,” said Mr Ambani, giving no indication as to what will be done to address the production drop from KG D6.
RIL has seen output from KG-D6 basin drop to 48-49 million standard cubic metres per day (mscmd) from almost 60 mscmd in March 2010. The company was supposed to ramp up its production to 80 mscmd by March 2011.
The drop in output also slowed down RIL's profit growth in the fourth quarter of the FY11.