Mukesh sets sight on strong, diversified RIL

Mukesh Ambani, Chairman, Reliance Industries, and his wife Nita on their way to attend the company's AGM in Mumbai on Thursday. Photo: PAUL NORONHA

Reliance Industries Ltd. (RIL) plans to double its operating profit in five years, even as it steps up investments in its core and ‘consumer-facing' businesses.

Addressing shareholders at the 38 annual meeting, Mukesh Ambani, Chairman, said, “We will invest nearly Rs.1 lakh-crore over the next five years in India to build a stronger and more diversified Reliance.”

On refining and marketing business, Mr. Ambani said the company was aggressively pursuing partnership opportunities for feedstock. RIL is building the world's largest gasification facility to convert petroleum coke in to synthetic gas to be used as feedstock at the Jamnagar complex. “It is our target that this will add 30-40 per cent to the integrated Jamnagar complex margins within the next three years,” he said.

Next wave

Mr. Ambani said like other projects, the KG D6 had had its unique set of geological challenges. “The reserves from the existing D1 D3 field have proved far more difficult to produce than anticipated.” The company is now working with British Petroleum to understand the geology of the block and is chalking out an exploration and development campaign. The company is creating a pipeline of projects for the next “wave of oil and gas development projects which would include R series discoveries and satellite discoveries.”

The company hopes to add around 30 million metric standard cubic metres a day (mmscmd) through it. RIL will proceed with the development of two coal bed methane blocks in Sohagpur, Madhya Pradesh, and expects additional quantities of gas by 2015.

RIL's total investment in shale gas exceeds $3.5 billion and net resources of Reliance from its three joint ventures in the U.S. are about 10 trillion cubic feet. Net sales from the joint ventures are expected to increase 10 fold to nearly 300 billion cubic feet in five years and the shale gas business was a major area of investment over 3-5 years, he said.

Analysts feel that the company has clearly focussed its attention on the longer term.

Speaking to this correspondent, Dipen Shah, Senior Vice-President, Kotak Securities, said, “there were no major announcements made that would impact the short-term prospects. There were no major announcements on the retail business or the 4G telecom foray or even the oil exploration business. The large investment planned will yield results only over the medium term.”

Focus on retail

Mr. Ambani said Reliance Retail achieved revenues of Rs.7,600 crore last year. “We are targeting a growth of five to six times in existing revenues to achieve Rs.40,000-50,000 crore over the next three to four years.”

Also, Reliance is working on an integrated digital services business model, “to become a global leader in delivery of digital content, applications and services. We are currently finalising our plans to offer services on a nation-wide basis.”

Buyback

The company's ongoing buy-back offer was the largest-ever announced by an Indian company at Rs.10,440 crore. Mr. Ambani said. It has to-date bought back 2.7 crore shares worth Rs.1,929 crore.