As much as ₹19,243 crore of the loans were non-current, long-term, borrowings, as per disclosures in RRL’s latest annual report. As of March 2022, it had a mere ₹1.74 crore in bank loans on its books. The retail business also raised ₹13,304 crore in long-term debt from holding company Reliance Retail Ventures Ltd (RRVL), taking its cumulative debt 73% higher from a year ago to ₹70,943 crore, as per the FY23 report.
RRVL is pumping money into RRL mainly through the debt route, an industry executive said.
Last fiscal year, the company opened more than 3,300 new outlets, taking its total store count to 18,040. The pace is likely to continue this year too with a bigger thrust on small cities and towns where penetration of modern retail is low, said the executive who did not want to be named.
“The increase in Reliance Retail’s long-term debt has largely funded investments to expand operational capacity, enhance stores, and develop digital platforms like JioMart,” said Mohit Yadav, founder at business intelligence firm AltInfo.”Much of the borrowing has been allocated across procuring new equipment, improving leased properties, and strengthening technology infrastructure,” he said. “While debt has risen over the past year, the investments made are expected to improve productivity and operational capacity.”An email sent to Reliance Industries seeking comment remained unanswered as of press time Friday.
Debt from RRVL
The industry executive said RRL’s debt from the holding company may increase going forward, as it is likely to pump more money into the venture. Also, a portion of the fund which RRVL is raising from investors by diluting Reliance Industries’ stake in it will likely be used for debt retirement, the executive said.
Reliance Industries last month raised Rs 8,278 crore by diluting a 0.99% stake in RRVL and may dilute another 8-10% over the next few months ahead of the proposed initial public offering of RRVL, as ET has reported in its August 25 edition.
Of the total bank debt as on March 31, 2023, apart from the long-term borrowing, RRL had taken Rs 11,459 crore as current or short-term borrowing and Rs 1,599 crore towards working capital.
Non-current Assets Rise 96%
RRL’s non-current assets rose 96% from the previous year to Rs 79,357 crore in FY23, indicating that most of the money raised last fiscal year had gone into funding the expansion. Of this, property, plant and equipment went up by 180% to Rs 39,311 crore, as per the annual report.
Its debt-to-equity ratio increased in FY23 to 1.91 from 1.35 in FY22.
Yadav said this is notable but not alarming given the company’s track record.
“Like parent Reliance Industries in its high growth years, the borrowing has funded productive investments in capacity and assets rather than expenses. With Reliance Retail’s strong revenue growth and operating leverage, the higher leverage appears manageable at this stage. However, prudent financial management will be needed to ensure debt levels remain sustainable going forward,” he said.