RIL eyes Fortune 50 tag with $30-bn investment

Reliance Industries Ltd (RIL), India’s largest private-sector company, will invest Rs 1.8 lakh crore ($30 billion) across businesses — petrochemicals, refining, retail and telecom — over the next three years. The company, aspiring to break into the Fortune 50 club, will also launch its 4G broadband services in 2015 and strengthen its management team.

“Over the next three years, the commissioning of each of our large projects will propel us closer to our aspiration of being a Fortune 50 company,” said RIL Chairman & Managing Director Mukesh Ambani while addressing shareholders at the company’s 40th annual general meeting in Mumbai on Wednesday. At present, RIL is ranked 135th on the Fortune 500 list of global companies.

“In the past 37 years, we invested Rs 240,000 crore; in this current three-year investment cycle, we will be investing over Rs 1,80,000 crore,” Ambani said. “What we are trying to do in the next three years is unique. While we will go in debt of about Rs 60,000 crore from being debt-free, our goal is that we will be debt-free on a much larger basis in 2017-18.”

On BSE, the RIL scrip fell 2.12 per cent from Tuesday’s close to end at Rs 1,066.80.

Shareholders, for the first time, received the lowdown on RIL’s rollout plans for the much-awaited digital services initiative — Jio. Ambani said limited field trials were already underway for the pan-Indian, fourth-generation broadband initiative. Expanded field trials will commence this August in multiple cities and continue through the end of 2014 and early 2015. “The year 2015 will see a phased launch of Reliance Jio, a Rs 70,000-crore initiative,” said Ambani.

The network and broadband services will initially cover all states, all the 5,000 towns and cities accounting for over 90 per cent of urban India and over 215,000 villages. Eventually, the network will encompass 600,000 villages.

Ambani explained the acquisition of Network18 Media and Investments and its subsidiary TV18 Broadcast was one aspect of the digital services play.

Reliance Industries shareholders also approved on Wednesday the appointment of Nita Ambani, chairperson of Reliance Foundation (RF), as a director on the RIL board. Welcoming her to the board, Mukesh Ambani said: “Nita has been engaged in several initiatives that have strengthened Reliance. We are delighted to welcome her to the board of RIL as an accomplished individual who will add significant value to Reliance’s journey of growth.”

Ambani also used the platform to highlight RIL’s performance in the past 37 years and tell the shareholders they must have faith that RIL had no reason not to do what was not right (referring to the disputes and allegations involving RIL).

On the petrochemical front, Ambani said RIL was strengthening its plastics business by building a new integrated cracker capacity, which would rank among the most competitive being built anywhere in the world this decade.

“Our petrochemical investment is aimed at adding value to the refinery streams and feedstock and focuses on the growth potential of the Indian market. As we complete our petrochemical investments within the next two-three years, we would have added high-margin speciality products and improved cost positions in each key sector,” Ambani said.

On RIL’s ongoing arbitration with the government on the issue of disallowance of cost recovery and seeking implementation of the ‘Domestic Natural Gas Pricing Guideline 2014’, Ambani said: “We will endeavour to work with the government for both the arbitrations to achieve prompt and efficient resolution of the matter.”

“Last year, we saw several false allegations, outright lies and half-truths against this business. We addressed all of the allegations with the truth and facts proactively,” he added. Last evening, RIL hosted the Flame of Truth booklet on its website. Ambani urged the shareholders to visit the website and read the booklet.

Reliance Retail, which has the distinction of being India’s largest retailer by revenues, would see further expansion in existing markets and explore newer markets and channels. In organised retailing, Ambani said RIL was confident of doubling its business every three-four years.

On the investment announcements, Edelweiss Financial Services Managing Partner (global wealth management) Ambareesh Baliga said: “This (the Rs 70,000-crore telecom investment) will be a game-changer, not only for the company but for the entire sector. New facilities should also come on stream soon and RIL expects margin expansion here. In fact, the company expects margin expansion in the refining business segment as well. As regards retail, I feel the learning phase is over and the margins should improve going ahead. I have been bullish on RIL and the stock still merits a buy at the current level.”

Nirmal Bang Vice-President (equity research) Sunil Jain agreed: “The company has been investing heavily for the past two years and this will continue for a few more years. I think the RIL stock is a good bet for someone who has an investment horizon of two years. From the current level, it can go up to Rs 1,400 level in the next two years.”