FINANCIAL RESTRUCTURING: THE CASE OF RELIANCE INDUSTRIES LIMITED

Author Name: 1Mr. Sachin Rohatgi, 2Ms. Deepmala Jasuja, 3Mr. Bhakti Bhushan Mishra

Volume: 01 &  Issue:

Country: India

DOI NO.: 08.2020-25662434 DOI Link: http://www.doi-ds.org/doilink/10.2020-79746668/

Affiliation:

1. Assistant Professor, Global Business School, Noida, India     

2. Assistant Professor, Amity Global Business School, Noida, India          

3. Assistant Professor Amity, Amity Global Business School, Noida, India

ABSTRACT

Financial restructuring is the process in which assets and liabilities are restructured in such a way, that the overall capital structures of the company reorganize and revamped to enhance shareholder’ wealth. This phase is mostly followed by every business at some point of time, but not always to take care of any losses and shortfalls. The Reliance Industries Limited has also followed the process of financial restructuring. The main reason for financial restructuring by Reliance Industries Limited can be traced down from its balance sheet. The total debt of the company was Rs 2.88 Lakh crore and the net debt was Rs.1.54 lakh crore as on 31st March 2019. However net debt has been increased to 1.61 lakh crore as on 31st March 2020. At the annual general meeting held on 12th August 2019, the chairman of Reliance Industries Limited, Mr. Mukesh Ambani announced the road map to make RIL, a debt free company before 31st March 2021. On these lines he has announced that company will sell 20% stake in oil and petrochemical business to Saudi’ Aramco which will fetch a staggering amount of $15 billion or more than Rs.1 lakh crore. In the first quarter of FY 2020-21, Reliance Industries Limited is able to rise around Rs 1.15 lakh crore by divesting less than 25% in its subsidiary digital arm, Jio platforms to global tech investors. Beside it, RIL also have raised 54000 crores through right issue. In total the company has raised the capital of Rs 1.69 lakh crore from private placement and right issue during current quarter. This step would make the Reliance Industries limited a net debt free companies much before the scheduled time i.e.31st March 2021. Now the question arises, how will this financial restructuring benefit the company? Can fund raising through equity capital increase EPS of company?

Key words: Financial Restructuring, Reliance, Industries, Assets, Liabilities.