₹30,102 crore, down by 22% sequentially. The sharp drop in capex suggests that peak capex is likely behind. As such, analysts from Morgan Stanley expect this year to be eventful for RIL as the past two years of investments move into the monetization phase.
“We think investment cycles will be shorter than in the past two decades, with limited impact on balance sheet leverage," said the analysts in a report on 19 January. In Q3, net debt stood at ₹1.19 trillion, up 1.4% sequentially. The net debt to Ebitda ratio was 0.67x in Q3 and this is expected to be below 1x going ahead.
Ebitda is earnings before interest, tax, depreciation and amortization. To be sure, the pace of capex moderation needs monitoring ahead. For one, RIL’s new energy business is likely to commence by the end of 2024 and it may entail additional investments.
Here, any hiccups in execution may play spoilsport. “Whilst we think that RIL’s new energy plan is well thought through, we are reticent in ascribing any option value to this project as most of the announced projects would be used for captive energy consumption," said an Ambit Capital report on 20 January. Also, the company’s flip-flops on incorporating a new energy subsidiary, merging it into standalone operations and now letting it remain independent convey its trepidation on the returns it can generate from new energy, added Ambit.
Coming to RIL’s Q3 results, the weakness in the oil-to-chemicals segment was partly offset by the other verticals leading to a nearly 1% sequential drop in consolidated Ebitda to ₹40,656 crore. The oil-to-chemicals segment was hurt due to the planned maintenance, inspection shutdown and lower downstream chemical margins. What’s more, the segment’s outlook is not rosy.
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