Reliance Industries Limited (RIL) has emerged as the first runner up in the report of “India’s most respected companies” published by the Business World magazine. The company has made it to the list because of its ability to quickly design, execute and create a new business.
Over the past decade, RIL has strengthened its position in sectors like petrochemicals, refining, hydrocarbon exploration and production (E&P), retail, 4G telecom services and shale gas. In addition to this, the company has high cash flow, rising cash reserves and low debt. The annual profit surged by three times during the last fiscal year. Reliance’s focus on building size and scale has inundated it to become financially sound due to which the company has weathered the global economic crisis in a better way than most of its global and domestic competitors. At the last annual general meeting, Mukesh Ambani announced an investment plan of Rs 150,000 crore to create four strong portfolios.
“In five years, the new businesses will start contributing to the balance sheet in the same volume as the current performing verticals,” says Deven Choksey, Managing Director of K.R. Choksey Securities. The company announced an investment of $6.5 billion to enhance the production of its KG-D6 basins along with its British partner BP Plc and Niko. Furthermore, the government has approved a proposal to double the price of gas from 1 April 2014. As the petrochemical business is volatile, RIL is now reducing its dependency on refining. In order to strengthen its non-core sectors, RIL has spent Rs 18,000 crore to buy telecom spectrum and begun the initial infrastructure lay out for 4G services rollout.
Reliance Retail has emerged as the country’s leading retail chain in a short span of eight years since its launch. Ambani plans more investment in this business, which generated Rs 10,800 crore revenue from its 1500 stores. Retail chain CEO, Robert Cissell is looking forward to build more hypermarkets of 50,000 sq.ft to use the fresh investment into retail.
On the global front, RIL is investing in its shale gas assets in the US. In 2010, the company had ventured into the competitive resource base of Marcellus and Eagle Ford Shale gas formations by entering into three joint ventures (with Chevron, Pioneer and Carrizo). “After building a materially significant business position in the US, Reliance is committed to expanding and creating similar positions in other countries,” Ambani added. As a part of this strategy, the energy giant recently signed a memorandum of understanding with a Venezuelan company to evaluate opportunities for the development of heavy oil fields in Orinoco Oil Belt of Venezuela.
RIL is also a hit amongst its shareholders. “The company always rewarded us with bonus shares and dividends. It protected share value through buy backs,” said a Mumbai-based shareholder at the annual general meeting.
With its core businesses going strong, RIL is now steadily moving into sectors that will be dominant in the future.