Reliance invests $125 billion in capex in last 10 years | Top Vip News


In New Delhi, Reliance Industries Ltd has invested more than $125 billion in the last ten years as it undertook a massive expansion in the hydrocarbon and telecom businesses, according to a report, estimating that the conglomerate’s investments in the next three years would be concentrated in retail with relatively lower capital expenditure. and new energy upstream.

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Reliance is emerging from a series of long and intensive capital spending cycles.

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“The company has invested nearly $30 billion between FY13-18 to increase the scale, integration and cost competitiveness of the O2C business, and nearly $60 billion between FY13-24E in 4G/5G capabilities to create a high-growth telecom business,” Goldman Sachs said in an in-depth report on Reliance.

Now that the rollout of 5G across India is likely to be complete and potential telecom tariff hikes are looming, I expected the telecom business to become a strong free cash flow generating business along with the current source of O2C revenue.

“We believe the businesses that RIL will invest the most in the next three years have relatively lower capital expenditure, higher returns and a shorter gestation period,” he said.

A refining or petrochemical facility would typically take at least five years to come online, versus about two years for a poly-to-module integrated solar facility and 6 to 12 months to get a retail store up and running.

“RIL has invested over $125 billion in capital expenditure in the last 10 years, mainly in hydrocarbons and telecom, which require more capital expenditure and have a longer gestation period,” he said.

“While the capex cycle for hydrocarbons and 4G telecom was completed during FY17-19, we saw an accelerated telecom capex cycle in 5G, which will now be completed in FY24.”

The report expected capex intensity to peak at $17.6 billion in FY23, declining sequentially to $11.2 billion in FY26E.

Goldman Sachs said new business returns are likely to be higher and capital spending relative to EBITDA is likely to be faster. Apart from being less capex intensive, RIL has brought forward a large portion of capex for the retail business.

Offline square footage has more than doubled during FY21-24E through aggressive store expansions along with investments in omnichannel capabilities.

New retail now represents 19 percent of the core retail segment, and the omnichannel presence has spread from groceries to fashion, lifestyle and electronics in the last two years.

“Overall, we estimate that retail EBITDA will almost double again between FY24-27 and the share of consolidated EBITDA will rise to 14.3 per cent in FY27 from 12.4 per cent in FY23 , while capital spending intensity will decline sequentially,” he said.

RIL’s capital expenditure on new energy was carried out in two phases: first, on upstream manufacturing, where it has earmarked $10 billion to complete fully integrated solar and battery manufacturing plants.

“In our view, a much larger capital outlay will be linked to the planned second phase of deployment, where RIL could potentially set up solar, electrolyser and wind capabilities for new power production,” he added.

This article was generated from an automated news agency feed without modifications to the text.

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