Reliance Capital puts focus back on core with sale of Big Cinemas

Billionaire Anil Ambani is conscious of the over Rs 1.14 trillion-debt burden his Reliance Anil Dhirubhai Ambani Group (ADAG) companies are shouldering. Naturally, he is making every attempt to infuse equity and pare debt from the overstretched balance sheets of group companies.

For Reliance Capital, the financial services arm of the group, this also serves the objective of getting its focus back on core operations. The company brought down its debt to Rs 20,564 crore at the end of the first half of the current financial year from Rs 25,577 crore a year ago. This improved the debt-equity ratio of the company to 1.61 from 1.93.

The sale of BIG Cinemas to Carnival by Reliance Capital unit Reliance MediaWorks will help in further reducing debt by about Rs 700 crore through a combination of transfer of debt and infusion of cash.

“The proposed transaction is in furtherance of Reliance Capital's stated objective of focusing purely on its core financial services businesses, significantly reducing exposure to non-core investments in the media and entertainment sector, and reducing overall debt,” said Sam Ghosh, chief executive officer, Reliance Capital.

The deal excludes real estate owned by Reliance MediaWorks at IMAX Wadala and other properties that the company intends to separately monetise for approximately Rs 200 crore.

The company is already into asset management, life and general insurance, commercial finance, equities and commodities broking, wealth management services, asset reconstruction and other activities in financial services.

It unsuccessfully tried for a banking licence earlier this year and is now looking to enter new businesses in financial services. At the annual general meeting of the company Ambani shared plans to explore new opportunities in health insurance and affordable housing.

This will require fresh capital and the deleveraging of the Reliance Capital balance sheet will be helpful. The company is also in talks with two or three international investors to sell its 16 per cent stake in leading travel portal Yatra.com for an estimated Rs 500 crore.

The pruning of debt at other group firms has continued in the current financial year. Reliance Communications, the mobile service provider, brought down its debt to Rs 31,839 crore at the end of the first half from Rs 41,978 crore at the end of the last financial year. This has helped the company lower its debt-equity ratio to 0.87 from 1.25.

In June the company raised Rs 6,100 crore by selling shares to institutions and warrants to promoters. Besides, it received money from Reliance Jio under network sharing agreements that helped it prune debt.

However the debt for Reliance Infrastructure has increased to Rs 31, 839 crore in the first half from Rs 24,289 crore at the end of last financial. The debt for Reliance Power in this period has moved marginally to Rs 30,316 crore from Rs 30,042 crore.