This made Reliance a net free cash flow company in FY21. That is, more cash was coming in via sales than was going out via operating or financing expenses.
It ended the year with a return on capital of 9.6% on a standalone basis – on a consolidated basis this would be around 6% given the capital investment in the subsidiaries.
Brokerages estimate that Reliance, on a consolidated basis, will generate Rs 1.70 lakh crore in operating cash flows and Rs 63,000 crore in free cash flows over the next two financial years. But that is already earmarked for capex towards Jio Platforms and Reliance Retail. Also, the cash generated by these individual businesses may not be fungible as they are now independent, board-governed companies with marquee investors. Arm’s-length will have to be maintained.
In FY21, Rs 36,000 crore, close to half the total consolidated capital expenditure of Rs 79,667 crore, was for digital services. The FY22 capex of Rs 88,000 crore is also largely for the digital business. Over the next three years, brokerages estimate a normalised level of capital expenditure to Rs 40,000 -50,000 crore each year. Again, mostly allocated to the digital and retail ventures.
This doesn’t leave much room to scrounge up the Rs 75,000 crore RIL needs over the next three years to back Ambani’s new green energy plans.