After last week’s $5.7 billion deal with Facebook Inc., Reliance Industries Ltd (RIL) said this week it will consider a rights issue at its board meeting on 30 April.
The company’s urgency to reduce leverage is actually a bit disconcerting. The Facebook deal will bring debt levels to fairly comfortable levels. “We expect the (Facebook) transaction to reduce RIL’s consolidated net debt/EBITDA by 0.4 times to well below 3 times, the tolerance level for its Baa2 rating," said Moody’s Investor Service last week.
What then explains the urgency to reduce debt? Some analysts say that a possible delay in asset sales in the refining and petrochemicals business and the fibre infrastructure business is leading to this decision.