July 6 marks the death anniversary of one of the visionary industrialists of modern India – Mr. Dhirubhai H. Ambani. Mr. Ambani created India’s largest and unquestionably best business empire, Reliance Group. The Reliance Group started with a textile company, Vimal and then first went into Petrochemicals, and later forayed into communication, telecommunications, broking, retail and so much more. Reliance has during its journey crossed several milestones to become a Fortune 500 company in less than three decades. Reliance continues to cross newer and bigger milestones in its quest for what is known as “Growth is Life”.
In the future, even better returns from the group of Reliance can be expected. Reliance Industries Limited, the flagship company of Reliance group, is the most weighted script of stock exchanges of India today with the Ambani duo featuring in ‘the richest persons on earth’ list. Reliance went public with IPO in 1977, when Dhirubhai Ambani introduced equity cult in India, and a new model of business leadership from a base of the broadest public shareholding. A history of sorts was made when, in 1993, Reliance Petroleum Ltd. Public Issue, India’s largest public offering, was introduced. During the same year, Reliance was the pioneer Indian company to issue the first ever Euro Convertible Bond. In 2002, the merger of Reliance Petroleum Limited with Reliance Industries Limited was announced, which was the largest ever merger in Indian corporate sphere. Reliance Industries became the largest private sector company in India on all major financial parameters including sales, profits, net worth, assets, and exports. During the same year, Reliance revolutionized the way an Indian communicated by initiating Reliance Infocomm to launch various telecom services and became a major catalyst for changing the face of India and improving the quality of life of Indians.
Now, RIL is investing heavily in the Exploration and Production (E&P) business and has also entered into various international price-sharing contacts for the same. Given the surge in hydrocarbon prices and robust demand, investment in E&P augurs well for the company. In addition, the Refining segment continues to contribute almost half the operating profit with RIL’s GRM beating the industry average. With the Reliance Petrochemical Ltd (RPL)’s refinery coming on board, the company’s refining business will get a further boost.
RIL and Gas Authority of India Ltd. (GAIL) have signed a Memorandum of Understanding (MoU) for joint cooperation in exploring opportunities for setting up petrochemical complexes outside India in feedstock-rich countries. Reliance Exploration and Production (REP), the wholly owned subsidiary of the Company, has signed a production-sharing agreement for two more exploration blocks in Yemen. RIL holds 70 per cent interest in these blocks.
Key risks to RIL’s growth include the fact that in the recent past, crude prices have shown more-than-expected volatility. Therefore, any unanticipated reduction in the GRMs can hurt RIL’s earnings estimate. As majority of RIL’s sales are derived from exports, appreciation of the rupee can adversely affect margins. Continued delay in the decision over the dispute between RIL and RNRL over the supply of gas to the latter at below-the-market price could adversely affect the Company’s profitability. However, surging hydrocarbon prices and robust global demand should do some good for the company. To meet the rising demand, RIL is aggressively exploring and acquiring new blocks and has entered into numerous production-sharing contracts internationally.
Recently, Mr. Mukesh Ambani made headlines by foraying into the retail segment with the launch of Reliance Retail Ltd. (RRL). Though the revenue from the retail segment is yet to take off, the Company is investing heavily to expand its retail chains. During the quarter, RRL launched new formats such as Reliance Trends, Reliance Footprint, Reliance Wellness, Reliance Time-Out, Reliance Jewels, and Reliance Super. All in all, the Company can now boast of nine different formats and over 465 retail stores across India (including Reliance Fresh). Recently, RRL has entered into an agreement with Marks & Spencer and Apple to build specific stores in India.
“All that said is done” – are the words Mr. Mukesh Ambani said in the AGM held last year. This is the clear indication of the strong fundamentals of Reliance and how it transformed the Indian dream. It stands for its motto – “Growth is Life”