On the liabilities side, Credit Suisse said RIL’s liabilities increased from $19 billion to $65 billion in four years. The company’s crude payables have also increased and are higher compared to global peers such as Valero in the US, Korean refiners, and Indian oil marketing companies, according the report.
“RIL’s standalone payable days (mainly crude payables) have increased significantly over the past four years. It used to be in the range of 50-60 days, but was high at 121 days in FY19. Payable days reduced from high of 163 days in FY18 to 121 days in FY19 but are still 2-4 times of peer average.
Most of the peers have crude payable days of 30-60 days,” the report said.
On RIL’s telecom business, the report said: “Jio’s capital employed per user is $105 (excluding capitalised expenses) and the current Ebitda per user is $9 (with no rentals on InvIT and benefit of lower access charges). Return on capital employed (RoCE) currently is low at less than 3 per cent.”
“For Jio to make 9 per cent RoCE, Ebitda per user needs to increase to $16, requiring 50 per cent more price increase in only telecom or through a combination of monetisation through merchant point-of-service network.” Ebitda is earnings before interest,taxation, depreciation and ammortisation.
For the refining business, Credit Suisse said: “We do build upside from IMO 2020 but given high-supply pressure, the duration of benefit may not be long. We expect large capacity additions over the next four years (especially in 2021 and 2022) and together with lower demand, we are cautious on outlook for the refining segment.”