Adjusted net debt, however, at Rs 2.57 trillion is higher and would take longer to repay.
"That said, we expect concerns on leverage to be gradually allayed as asset sales continue and tapering capex generates positive free cash flow (FCF)," it said.
With telecom arm Jio's capital expenditure (capex) largely complete, RIL should generate FCF of more than Rs 20,000 crore in FY21 (same as FY20) despite weaker oil and gas earnings.
"We expect RIL to monetise 20 per cent of Jio; this along with partial proceeds from the rights issue and sale of (49 per cent of) fuel retail (to BP for Rs 7,000 crore), not to mention FCF, would lead to cash proceeds of Rs 1.3 trillion, thereby putting the company on the path to zero net debt in FY21," the brokerage said.
However, adjusted net debt (creditor capex plus spectrum liability) is much higher at Rs 2.57 trillion.
"To repay this, RIL will need to tap into its massive divestment pipeline of oil-to-chemical (O2C) assets (Rs 1 trillion) and fibre InvIT (Rs 1.2 trillion). Progress on this front would, therefore, continue to allay market concerns around leverage," it noted.
Even a 5 per cent stake sale of O2C assets to Saudi Aramco (versus talks of 20 per cent) can help fill the shortfall, it said.
The Aramco deal was to conclude by March 2020 but it is now expected within 2020 calendar year.
When RIL announced its rights issue of Rs 53,125 crore on April 30, it was perceived as part of the company's aim to become net debt-free by March 2021. But with shareholders needing to pay only 25 per cent of the rights issue price on application, the proceeds will be Rs 13,281 crore in total and cannot be a major source of debt reduction plan.
The remaining portion of the rights issue price is to be paid next fiscal.
With major refining and telecom projects achieving completion, capex in FY20 slid to Rs 76,000 crore from the high of about Rs 1 trillion in FY19.
"We expect capex to decline further to Rs 46,000 crore in FY21, offsetting lower operating cash flow from oil and gas," it said.
As a result, FCF is expected to remain steady at over Rs 20,000 crore in FY21. "Self sufficiency in operations has the added advantage of freeing up asset sales for deleveraging," it said.