In an equity research note on 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
New Delhi: Billionaire Mukesh Ambani-led Reliance Industries’ (RIL) cash reserves may rise to $25 billion (about Rs1,25,000 crore) by March 2012, putting the corporate giant in a comfortable position for investments in existing and new businesses, reports PTI.
In an equity research note on 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 30 September 2011.
Subsequently, RIL received a balance payment of $3.2 billion in October from BP for a 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 31 March 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 Rs67,397 crore ($15.1 billion) as of 31 March 2011, as against Rs62,495 crore ($13.9 billion) a year ago.
At the same time, RIL had cash and cash-equivalents of Rs42,393 crore ($9.5 billion) as on 31st March 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% 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.
UBS said that any visibility on value creation from its investments and developments like retail turning profitable, a tie-up with a global retailer, the government allowing foreign direct investment in retail, and RIL monetising its SEZ land assets could act as positive catalysts.
UBS said that it believed “some township development in partnership with Infrastructure Leasing & Financial Services is underway” with regard to SEZ land assets.
“Further, we believe efficient cash deployment in future ventures including upstream assets, such as gas blocks, and the LNG chain; new-generation high growth businesses, partnering with technology leaders (such as BP), and a potential buy-back will be positive catalyst,” it said.
UBS also counted inorganic growth of global refining and petrochemical capacity at attractive valuations as potential catalysts, but cautioned that it was unlikely to create significant value as it could make the business more cyclical.
At the same time, the report said that the stock could be affected adversely in the event of any potential regulatory penalties, any severe downcycle for the company’s refining and petrochemicals businesses amidst a global recession.
The risks could also arise from any inefficient use of cash for non-strategic large investments and losses mounting from previous non-core investments, it added.
There have been lots of speculations about RIL’s plans for new segments like broadband and financial services.
For broadband venture, it recently acquired stake in an online education company for an undisclosed amount, while there have been reports about RIL leasing infrastructure from other telecom players.
In financial services space, RIL has formed a joint venture with DE Shaw and has announced buyout of Bharti group’s stake in the latter's insurance ventures with AXA.
RIL’s market value currently stands at about $60 billion (Rs2,90,000 crore). Its revenues were in excess of Rs2,65,000 crore and profits of over Rs20,000 crore in the fiscal 2010-11.
Cheque transactions have been on the decline during the past few years with the growth of the electronic transfer medium, according to experts
Mumbai: The total value of transactions carried out using cheques across the country amounted to Rs7.64 lakh crore in September 2011, down by 1.4% over the same month last year, reports PTI.
Banks had cleared cheques worth Rs7.75 lakh crore in September 2010, according to Reserve Bank of India (RBI) data.
The number of cheques cleared by banks in September 2011, however, went up by 2.6% in comparison to the same month last year.
A total of 11.12 crore cheques were cleared by banks during the month under review compared to over 10.84 crore in the corresponding month of 2010.
During the April-September period, the total value of transactions carried out using cheques stood at Rs48.88 lakh crore, as against Rs49.15 lakh crore in the same period a year ago, a marginal dip of 0.1%.
In addition, a total of 66.62 crore cheques were cleared by banks during the first six months of the current fiscal, a decline of almost 3.5% from 68.37 crore in the April-September period a year ago.
In September, the Mumbai region reported the highest number of cheque clearances, as well as the maximum transaction value for any zone.
Banks in the Mumbai region cleared a total of 1.96 crore cheques, with total value of over Rs1.26 lakh crore.
In the Delhi region, banks reported that 1.29 crore cheques with a total value of a little over Rs1.05 lakh crore were cleared in September.
The Chennai region stood third, with banks reporting a total 62.5 lakh cheque clearances worth over Rs44,600 crore.
Cheque transactions have been on the decline during the past few years with the growth of the electronic transfer medium, according to experts.
The value of cheque transactions in the country declined by 2.6% year-on-year to Rs101.33 lakh crore in 2010-11. Delhi and Bangalore were the only major centres to report a rise in the value of clearances last fiscal.
However, the total number of cheques cleared by banks across the country grew marginally by 0.4% in 2010-11.
Over 1.38 lakh crore cheques were cleared by banks across the country last fiscal, as against 1.30 lakh crore in FY2009-10.
Bankers of Kingfisher, who met in Mumbai on Saturday, are expected to have more rounds of deliberations on its debt restructuring. Kingfisher is looking for additional working capital to tide over its severe cash crunch
New Delhi: Beleaguered Kingfisher Airlines would have to wait some more time for relief as its lenders continued deliberations Sunday towards resolving the crisis, a day after prime minister Manmohan Singh said the government would explore ways to help the private carrier, reports PTI.
The cash-strapped airline cancelled 40 more flights on Sunday taking the total number of cancelled services to over 250 flights in one week putting thousands of passengers to inconvenience.
Bankers of Kingfisher, who met in Mumbai on Saturday, are holding more rounds of talks on its debt restructuring.
Kingfisher is looking for additional working capital to tide over its severe cash crunch.
Kingfisher has approached lender-banks for a reappraisal of working capital requirements following a surge in price of jet fuel in recent months.
Civil aviation minister Vayalar Ravi has ruled out any bailout package for the airlines but said efforts would be made to help the ailing aviation industry.
Asked whether the government had decided on allowing foreign direct investment (FDI) by foreign airlines in India, Mr Ravi told reporters “it is not a matter to be decided in a day. The proposal may come and then it will be considered”. Kingfisher promoter Vijay Mallya is making a strong pitch for allowing foreign airlines to pick up stakes in Indian carriers.
Mr Ravi, who is leaving for Bahrain on a three-day visit from on Monday, said he hasn’t yet met the prime minister on problems faced by Kingfisher and the aviation industry.
In a tweet, Mr Mallya said foreign governments go “out of the way” to support airlines but a leading industrialist and Bajaj Auto chief Rahul Bajaj said the private sector should not be bailed out by the government and “those who die must die”.
Opposition parties like the BJP and CPI (M) have also opposed any government bailout for the private airline.
The prime minister, while returning from the Maldives, told reporters “we will explore ways and means in which the airlines can be helped”.
At the same time, he said private airlines should be managed efficiently, “but if they do get into difficulties, we have to find ways and means to help them get out of the process.”
Bankers of Kingfisher, who met in Mumbai on Saturday, are expected to have more rounds of deliberations on its debt restructuring. Kingfisher is looking for additional working capital to tide over its severe cash crunch.
It approached lender-banks for a reappraisal of working capital requirements following a surge in price of fuel in recent months.
Meanwhile, industry sources said the 13-bank consortium, led by State Bank of India that has lent to Kingfisher, are not yet ready to provide a bailout package for the debt-ridden company.
After the first round of meeting, the banks have asked the airline promoters to put more equity into the venture and disclose additional financial details to them.
A core bankers’ committee has also been set up to vet the additional financial details to be provided by the airline management over the next few days, the sources said.
The bank representatives would meet their respective managements to take a call on the future course of action, the sources said.
Besides SBI, the consortium includes ICICI Bank, IDBI Bank, Punjab National Bank, Bank of Baroda, Bank of India, UCO Bank, Oriental Bank of Commerce and State Bank of Mysore.
Together, these banks now hold a 23.4% stake in the airlines and have an exposure of over Rs7,700 crore.
ICICI chief Chanda Kochhar said her bank’s exposure in the troubled airline was very less and there were no overdues.
The airline has suffered a loss of Rs1,027 crore in 2010-11 and has a mounting debt of Rs7057.08 crore.