Critiques have pointed out that going debt free in a fast growing economy like India, means that the company is not able to find new avenues of growth. Although there is some truth to this argument but put it in another way, RIL is at least not squandring away the money in high priced merger and acquisition.
Most of all, with the world economy being in an unpredictable stage, it makes senses for any company to be debt free. If RIL is the first one to proceed in this direction then its a good thing.
In my opinion even at the price range of Rs 950, the stock is worth a buy.
The company's business.
In the refinery divison, the company will be debt free. It will gain the expertise in drilling and exploration from BP. Its refining margins are at par with the best in the world.
Reliance Industries also bought shale gas reserves in US and intends to build capacity in the sector. Shale Gas is being affirmed as the next big source of energy in the world.
The petrochemical business of the company is also on its path to recovery. Plus RIL will be expanding its petrochemical by 2013. It also plans to consolidate its position as the world's largest integrated polyester producer.
The company's love for the telecom industry has not subsided. With the non-competance act scrapped between the two brothers, Mukesh Ambani bought the 4G spectrum in all 22 circles. This made the RIL, the company with the highest telecom bandwith in the country.
The company, RIL, also entered the financial market of the country udner a joint venture with DE Shaw. Very RIL like move, entering an industry under a JV. Once the business model becomes sustainable, the company would buy make it a wholly owned susidiary.
On the downside the company the biggest risk is on policy front, from the government. Slowdown in the global economy is also another risk for the company. But unlike others, RIL's zero debt will make it a safer company to invest in during tiems of turmoil.
On the business front there are two subsidiaries where the story should be followed carefully. Mukesh Ambani, chairman of RIL plans to become the leader in the retail segment. Then, the company's construction business under its subsidiary Reliance Ventures Limited (RVL).
The author of the article does not have any stake on the above-mentioned company.
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