The country’s largest company by revenues Reliance Industries has stepped up its ongoing investment plan to expand the business with the firm now in the middle of a three-year plan to invest as much as Rs 1,80,000 crore (or around $30 billion), the firm’s chief Mukesh Ambani said in the annual general meeting on Wednesday.
A year ago Ambani had said the firm will invest Rs 1.5 lakh crore ($26.3 billion then) in the next three years across business lines. This itself was a significant ramp-up from the figure of Rs 1 lakh crore that he had earmarked for investment in 2012 over a five-year period.
On Wednesday, Ambani said that the firm is currently at the mid-point of the largest investment programme of Rs 1,80,000 crore in Reliance's history. The company so far has invested Rs 240,000 crore during the past 37 years of its operations.
“The next three years are transformational in RIL's journey,” he said, adding 2016-17 will be the first full year in which the complete benefits of all these investments will be available to its shareholders.
The investment of Rs 1,80,000 crore will be made in petrochemical business, expansion of energy business, opening more retail stores and to roll out the telecom business.
Reliance Industries recorded its highest ever turnover of Rs 446,339 crore and net profit of Rs 22,493 crore in FY14 with exports accounting for over two-thirds of revenues. It continues to be India's largest exporter, accounting for 14.7 per cent of the total exports from India and is the highest tax payer in the private sector, accounting for 4.7 per cent of the country’s total indirect tax revenues.
Ambani said that the petrochemicals business of Reliance, the world's largest producer of polyester fibre and yarn and the fifth-largest producer of polypropylene, is expected to benefit because of highest allocation of capital among the company’s three energy businesses.
The polyester filament yarn plant with a capacity of 395,000 MT at Silvassa has been commissioned and is operating at full capacity. The company has also commissioned a new facility of Polybutadiene Rubber (PBA) of 40,000 MT capacity at Hazira, taking the total capacity to 115,000 MT.
The company also plans to add to the aromatics chain by upgrading refinery light-ends into the new paraxylene facility and alongside commission downstream PTA and polyster capacity.
The company is making rapid progress on India’s first Butyl Rubber joint venture project of 100,000 MT capacity at Jamnagar, he said adding that the company is slated to complete all its new projects in the next two years.
Oil and gas exploration and production
While commenting on the oil and gas business, Ambani said that D6 block in the KG basin completed over five years of uninterrupted and safe operations and the company continues the operations despite various challenges to maintain the production at the field.
Since inception, the fields have supplied over 2.3 trillion cubic feet of natural gas and about 25 million barrels of crude oil. The company is now carrying out appraisal of the discoveries to assess their potential.
On the ongoing arbitration with the government over the issue of disallowance of cost recovery, he said: “We along with our partners BP and Niko have initiated the arbitration process seeking implementation of the Domestic Natural Gas Pricing Guideline 2014.”
He also said that the firm is proceeding with the development of two coal-bed methane (CBM) blocks in Sohagpur, Madhya Pradesh, and is on the track to commence production from CBM blocks in 2015-16.
With the development of CBM blocks, Reliance will become the largest player in the unconventional energy sector in India.
International oil and gas
Reliance ventured into the resource base of Marcellus and Eagle Ford shale gas plays in the US, by entering into three JVs (with Chevron, Pioneer and Carrizo) in 2010. Ambani said the company has so far made an investment of over $7 billion across all three JVs as on March 31, 2014.
The materiality of the business improved further with Reliance share of revenues increasing by 45 per cent and EBITDA by 37 per cent.
The firm is planning to expand and create similar positions in other countries. As part of this effort, it has won two blocks in the offshore competitive bidding rounds of Myanmar. The company is also evaluating opportunities in Venezuela to further strengthen its relationship with PDVSA.
The firm’s seven-year old retail business grew by 34 per cent with revenues of Rs 14,496 crore during the last financial year and earnings before depreciation, finance cost and tax expense (EBDIT) of Rs 363 crore. Reliance Retail is now the country’s top retailer by revenues.
He said that the company will continue to invest in partnership with international retailers to augment its product portfolio and reach. The company will also augment its presence in existing and newer markets.
During the year, Reliance added 367 stores across formats. The company now operates around 1,691 stores spanning 146 cities across India and covering an area of over 11.7 million square feet, Ambani said.
Ambani said the value retail format has consolidated its position as the largest grocery retailer in the country and Reliance Trends has become the leading value fashion specialty retailer.
Reliance Jio – digital services business
Ambani further said that the company’s telecom arm Reliance Jio Infocomm, which is the only company to have nationwide permit for 4G services, will start rolling out broadband services in the coming months.
It will begin with field trials in August across multiple cities and commercial operations are expected in 2015 in phases across India, he said.
The network of broadband services will initially cover 5,000 towns and cities, accounting for over 90 per cent of urban India and over 215,000 villages in India, he added.
The recent acquisition of Network 18 Media & Investments Limited via open offer is one aspect of the digital play, which will differentiate and strengthen the company’s 4G business “ at the unique, intersects of telecom, web and digital commerce, and the media through a suite of premier digital properties,” he added.
(Edited by Joby Puthuparampil Johnson)