The Reliance Industries stock has been on fire, soaring almost 35 per cent in 2019 and adding several billion dollars to Mukesh Ambani’s net worth. But the country’s biggest industrial tycoon may have reason to worry as he squares off for a battle with the tax authorities and regulators in the new year.

Back in August, the oil refining to retail giant had unveiled plans to bring down its net debt to zero by the end of March 2021 — but a series of setbacks in the past couple of months could upset the debt-paring strategy even as it raises questions about the group’s equations with the Modi administration in its Second Coming.

The country’s largest private conglomerate had reported an outstanding debt of Rs 291,982 crore ($41.2 billion) at the end of September 30, fuelling some concerns about its gargantuan appetite for credit to finance its ambitious plans in the telecom and retailing businesses.

Ambani appeared to have all his bases covered until a series of setbacks at the close of the year, fuelling worries that federal authorities have started to place a few hurdles that could scupper his plans.

A major element of the debt-reduction plan is the proposed sale of 20 per cent in its oil and chemicals business to Saudi Aramco for $15 billion.

However, the government has tried to stall the transaction as it moved the Delhi high court claiming pending dues of $3.5 billion related to a greater share of profit petroleum from the Panna-Mukta and Tapti (PMT) oil and gasfields.

In October 2016, an international arbitration tribunal had reportedly issued a partial award in the dispute among the government, BG Exploration & Production India Ltd (BG) and RIL regarding the PMT production sharing contracts. Shell later acquired the 30 per cent participatory interest in the oil and gas fields from BG.

RIL has countered the petition saying that the government’s petition amounts to “an abuse of process as no arbitration award has fixed any final liability of dues on the company and that it was a ‘falsehood’ to say that the arbitration tribunal had passed an award requiring the company and its partners to pay $3.5 billion to the government”. The Delhi high court has reportedly asked RIL and the partner to disclose its assets and refrain from disposing of anything till the dispute is decided.

The development has led to some nervousness in the RIL stock because of uncertainty over the fate of the Aramco deal.

The concerns

There are a couple of other developments that could pose concerns as well. For a start, the telecom regulator has decided to extend the mobile call termination charge regime by almost a year till December 30 next year. Under the IUC regime, mobile companies need to pay 6 paise per minute to an operator to patch calls made from the former’s network.

The IUC regime was originally supposed to end from January 1. As a result, legacy telecom players such as Airtel and Vodafone Idea, which have been earning big bucks from Reliance Jio, have earned a big reprieve.

Jio had earlier levied charges of 6 paise per minute to calls made outside its network, thus blunting the edge vis-à-vis its rivals. This was one of the main reasons why telecom players raised tariffs, thereby easing some of the pain on their stressed balance sheets.

The taxman also got into the act by raising objections to certain aspects of a deal to demerge the fibre and tower business of Reliance Jio Infocomm.

Though the National Company Law Appellate Tribunal (NCLAT) has dismissed its petition, reports say the tax department was planning to approach the Supreme Court against the December 20 order.

Tax lens

The income tax authorities have once again reopened investigations into the charge that Mukesh Ambani and some of his family members hold undisclosed assets abroad — the revelations arising from a trove of information that the government received in 2011 from leaked data pertaining to accounts that several Indians had with an HSBC branch in Geneva.

Reports suggest that the IT department has sought information from its counterparts from seven countries in this connection. Back in 2015, the Reliance group had said these accounts were held by its entities and had all the requisite approvals. But the latest development means that the group has one more headache to deal with.

Market mavens believe 2020 will be an important year for RIL as it may see various announcements being made towards its plan to trim debt. They pointed out that while it will be premature to draw any conclusions at this stage with regard to the recent setbacks, the year could see further moves being made in the new holding company (that will house all its existing digital platform initiatives) on the lines of Alibaba Holdings or Alphabet Inc.

RIL has kept its options open on whether to induct a potential investor at the subsidiary level or at the level of an individual digital entity such as Jio.

Then there is also a possibility of a strategic or financial investor being roped in at Reliance Retail which was recently valued at around Rs 2.7 lakh crore after its shareholders were offered one share in RIL for every four held in unlisted Reliance Retail.

With several legal battles looming at the start of next year, the focus of attention will be on whether the deal with Aramco goes through and brings the capital it sorely needs to trim the outsized debt on its books.

Analysts also remain bullish about the prospects of the RIL stock in 2020. A note from Axis Securities — which lists RIL as one of its top picks for the year — says that the management’s plans to deleverage the balance sheet with measures such as a strategic stake sale in the refining and chemicals business, getting strategic & financial investors in the consumer businesses or the listing plans of Jio, Reliance Retail may lead to a re-rating of the stock.