Mumbai: Mukesh Ambani conducts a general meeting on Monday regarding the annual sales with the stakeholders planning for future endorsements. Ambani plans to cut off the debt taken from banks and take the company to zero debt. But his actions reveal more than in the story.
He endorsed 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. Ambani tackles the situation by bringing in the South Armaco and selling 20%share of reliance refineries which would clear off its debt. However it looks a good step to take $75 trillion from Armaco and making Indian Giant debt free which would also add up money on the Indian banks but only if it’s for the benefit of the nation.
Now that Jio has reached 340 million subscribers, though, the endgame is probably not more than a few quarters away. And that can be problematic for the country’s 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.
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. 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.
