Reliance Industries Limited (RIL) is the largest private company in India in terms of income, assets as well as profits. For the 5th time in a row, the company has topped the Business World Real 500 rankings.
In reference to the unparalleled track record of creating value, Chairman and Managing Director of RIL, Mukesh Ambani said, “Over the past 37 years, Reliance’s assets, revenue and EBIDTA (earnings before interest, depreciation, taxes and amortisation) have grown at a compound rate of 27 per cent.”
In the last financial year alone, the company posted a record income of INR 4,43,461 crores and an asset size of INR428,843 crores. These figures have gone up by 9.5% and 18.35% respectively when compared to the previous year.
The Role of the Jamnagar Refineries in RIL’s Growth
The relentless growth witnessed by RIL is justly attributed to its twin refineries and petrochemical complex at Jamnagar in Gujarat. The refineries have an aggregate capacity of 65 million tons per annum, generating a revenue of INR 3,61,970 crores. This accounts for 78% of the total revenue of RIL.
The second biggest contributor to RIL’s revenue is the petrochemical business that generated about INR 96,465 crores this year.
Performance of the Exploration and Production Vertical
While the year has been mostly optimistic for the company, it wasn’t without some glitches. The Exploration and Production (E&P) vertical of the company suffered a setback where the revenues in FY 2014 went down by INR 11,182 crores when compared to FY 2013.
According to Investment Strategist at Geojit BNP Paribas Financial Services, V.K. Vijaykumar, the reduction in gas production from the KG-D6 field along with the delay in price revision of gas are concerning. As a result of this, the government too, is taking a cautious approach on the revision of gas prices. RIL has thus not been able to take a decision on making investments towards the development of R-series, MJ1 and satellite fields.
On the other hand, RIL has been able to limit the impact of reduced revenues due to the KG-D6 crisis by posting a substantial growth in the sale of shale gas. Revenues from shale gas in FY 2014 went up by 45% within a year at $893.3 million.
Overall Market Sentiments
RIL was among the various other companies that was having a hard time this year. FY 2014 is deemed to be especially difficult for emerging markets. This is because a combination of high inflation, large current account deficits and low growth which resulted in extreme volatility in exchange rates.
RIL’s Path Ahead
RIL is planning to deploy cash from its traditional ventures into the broadband and telecom industry along with the retail sector. After posting its first profit since its inception in 2006, Reliance Retail exhibited a business growth of 34% with revenues at INR 14,496 crores.
Mukesh Ambani says, “I am confident our growth initiatives will create significant value for our society, our customers, our employees and our shareholders, continuing the Reliance tradition.”
As on September 30th, RIL’s outstanding debt stood at INR 142,084 crores. A major part of the borrowings in foreign denominations is for building the broadband vertical and for the expansion of capacity in its petrochemical plants.