Sitting on a huge cash pile of nearly Rs 83,000 crore, polyester-to-petroleum-to-retail conglomerate has earned close to Rs 8,000 crore through its treasury operations — investments of surplus funds in financial markets — during last fiscal.
The company’s full-year treasury income of Rs 7,998 crore accounted for a whopping 38 per cent of its annual net profit of Rs 21,003 crore in FY13 — showing a performance better than even some of the full-fledged financial services groups.
Announcing its FY13 annual results, billionaire Mukesh Ambani-led RIL said last week that it had an “other income” of Rs 7,998 crore, while its net income grew 32 per cent to Rs 21,003 crore.
This was the second consecutive quarter of increase after four quarters of decline, but the company shares reacted negatively in the markets, as there was a 1.4 per cent dip in revenues to Rs 86,618 crore from Rs 87,833 crore.
While net profit inched up by a paltry 4.8 per cent in the year, its treasury profit jumped by 29 per cent to Rs 7,998 crore from Rs 6,192 crore in FY’12.
When asked about the details of ‘other income’, RIL chief financial officer Alok Agarwal said at a media interaction after the earnings release that “the entire sum came from the treasury operations.”
Mr. Agarwal also said RIL is seriously working on a massive expansion of proprietary trading business by launching a full-fledged brokerage arm under its financial services vertical launched last year with DE Shaw of the US in an equal JV.
Mr. Agarwal also said, with USD 44.1 billion in export income, the company contributes 14.6 per cent of the nation’s overall export income of USD 300.6 billion in FY13.
In the March quarter, the other income contributed Rs 2,243 crore to the Rs 5,589 crore of the quarterly net income, which is more than 40 per cent of total profit of the company.
The company was sitting on cash mound/ cash equivalent of a staggering Rs 82,975 crore, while its debt stood at Rs 72,427 crore at the end of the fiscal 2012-2013.
The company said it is debt-free on a net basis as of March-end.
For the full fiscal, its finance cost stood at Rs 3,036 crore, while the net income from treasury operations stood at Rs 7998 crore, which is Rs 4,962 crore more than what it spend in interest cost during the year.
During the fiscal, company raised around Rs 8,200 crore in debt, including USD 800 million through a 5.875 per cent perpetual bonds.
In the first nine months of the fiscal, the share of the interest income in RIL’s earnings stood at nearly a fifth of the operating profit, up from 11 per cent in FY12 and 6.4 per cent in FY11.
On the brokerage entry, Mr. Agarwal said: “We want to make our brokerage arm to be based on algorithmic trading but will be a completely new model of brokerage.”
When asked on the proposed entry in a business segment that is bleeding, Mr. Agarwal said: “We are sure with latest technology we can conquer that.”
“...currently it is still at the drawing board level and we are still putting in a team,” he added.
RIL and DE Shaw put in USD 5 million each into the financial services arm so far, he added.
In March 2011, Reliance Industries Limited and the D E Shaw group announced that they have agreed to establish a joint venture to build a leading financial services business in India.
The partners had said the joint venture would incorporate the DE Shaw group’s investment and technology expertise with Reliance’s operational knowledge and extensive presence across India to offer a comprehensive array of financial services to the Indian marketplace.
