Re: Re: {LONGTERMINVESTORS} RELIANCE INDUSTRIES... thread....
RAJESH DESAI
Reliance Industries marked its foray into the telecom sector by acquiring Infotel Broadband for close to $1 billion last year giving it broadband wireless access licenses in 22 circles across India.
A spokesperson for Reliance Industries denied any such move. An Aircel Spokesperson said in response to queries from ET Now, "This is a baseless rumour and a mere speculative report".
People familiar with the ongoing due diligence exercise said Reliance Industries is formulating a plan to expand its basket of services to include both voice as well as data services and is keen to buy a telecom services provider which will give it access to much required back-end infrastructure as well as a large customer base which it could put to good use for its broadband roll-out.
Aircel has close to 60 million customers and 2G spectrum licenses to operate in 22 circles across India. The company also acquired 3G licenses in 13 circles and Broadband Wireless Access licenses in 8 circles in India.
Aircel had revenues of Rs 5600 crore for the calendar year 2010 and posted a net loss of Rs 260 cr for the same period. The company is likely to have total debt of close to Rs 17,000 crore this year.
Malaysia's Maxis Communications Berhad owns a 74% stake in Aircel and has been in talks with multiple global as well as local telecom players to divest its holding in the company according to people close to the group but has so far failed to arrive at a deal due to differences in valuation expectations.
Maxis is owned by a Malaysian billionaire Tatparanandam Ananda Krishnan.
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Buy Reliance Industries , says Devang Mehta, Vice President & Head - Equity Sales, Anand Rathi Financial Services.
Mehta told CNBC-TV18, "In Reliance - we have seen the Petchem margins were under pressure, the ENP business a big drag but only the refining margins has been a savior for the company in this quarter as well. People are expecting some big bang news from Reliance, which is not coming at any point of time."
He further added, "We do have a fundamental buy target – we know that the stock has underperformed. Anybody who has a long term horizon can probably buy Reliance for one and a half, two years easily with a target of Rs 1050-1100 could come on Reliance."
Disclosure: The stocks that we have discussed we would have recommended clients as a broking house. I do not have any personal positions in them though.
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RAJESH DESAI
See further downside in Reliance Industries , says Laurence Balanco, Asian Technical Research, CLSA.
Balanco told CNBC-TV18, "If you look at the charts of Reliance, it has been range bound for 18 months and had broke down below key support areas. So it does suggest further downside from the breakdown that we have seen from that consolidation pattern that we have seen take place over the past 18 months."
The company's trailing 12-month (TTM) EPS was at Rs 64.44 per share. (Jun, 2011). The stock's price-to-earnings (P/E) ratio was 12.03. The latest book value of the company is Rs 446.19 per share. At current value, the price-to-book value of the company was 1.74. The dividend yield of the company was 1.03%.
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The government on Tuesday cleared the $7.2 billion Reliance Industires (RIL)-BP deal. According to the deal, BP will take 30% stake in 21 oil and gas production sharing contracts that RIL operates in India, including the KG-D6 block.
Following the approval, RIL and BP will work together to conclude the deal expeditiously.
Shares of RIL were trading at 763.90, down 2.14% during morning trade on the Bombay Stock Exchange
RIL
in a statement said that it is grateful to the government for the
approval, which will result in the largest foreign investment in the
domestic hydrocarbon sector.
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Analysts feel RIL shares cheap; what about the promoters?
Published on Fri, Aug 19, 2011 at 13:16 | Source : Moneycontrol.com
Santosh Nair
Moneycontrol.com
With Reliance Industries shares now at their lowest level in almost two-and-a-half years, leading brokerage houses think it is a good time to start buying the stock as the downside appears limited. The stock touched Rs 722 intra-day, and has shed 40% in less than 10 months.
But as veteran market players point out, with the Reliance, it is not about what analysts and fund managers think of the stock. Rather, it is about what promoters think of their stock.
So far, there is no indication that promoters feel their stock is a compelling buy, after the steady decline over the past few months.
At least, there has not been any open market purchase by them recently, which could suggest the stock price is close to bottoming out.
Insider buying, more than insider selling, is more closely followed by the market, as it speaks of the owner’s confidence in his business.
Many fund managers—domestic and foreign—have cut exposure to the stock during the April-June quarter, or stayed neutral even as the prices weakened.
It is not easy for fund managers to ignore RIL, because of its highest weightage in both the Sensex and Nifty. But the promoters' indifference—as perceived by the market—to the slide in the stock price is leading many fund managers to believe that there could be a strong reason for the price being allowed to drift.
Meanwhile, here is what CLSA has to say of Reliance Industries in its report dated August 18.
"The exploration and production (E&P) value implied by the stock price is also near its five-year lows. Given beaten-down expectations, a significantly milder final audit report by CAG (within coming weeks) should pave the way for a stock-price rally."
The brokerage house has cut its price target for the stock from Rs 1050 to Rs 960, but recommends buying the stock as the risk-reward ratio is attractive.
"Taking into account current downstream peer multiples; assuming a repeat of FY10, ie, a US$6.7/bbl gross refining margin (1QFY12=US$10.3/bbl); a petchem margin of US$348/t (1QFY12=US$453/t); upstream at an implied base of US$7.2bn BP deal value (ignoring the US$1.8bn development bonus); and Reliance’s investments, below book value of 0.4x PB, returning a bear-case value of Rs705 per share, this implies 6% downside," say CLSA analysts Somshankar Sinha and Vikash Jain.
JP Morgan feels the market is pricing in a "gloom and doom" valuation, which may be exaggerated.
"RIL stock has corrected 14% since July and now reflects refining margins of approximately US$6.5/bbl(vs. US$10.2 year-till-date), 30% downside to our petchem (petrochemical) spreads, and a 60 mmscmd plateau for D6 gas with no further value attributed to E&P. We maintain the asset is attractively priced," JP Morgan analysts Pradeep Mirchandani and Neil Gupte say in their report.
"RIL is currently trading at 5.2 times EV/EBITDA on our earnings projections. This is below its 2008 trough. Earnings would need to contract 32% to reflect the multiples (seen during the global financial crisis)," they add.
Reliance Industries
Too big for India
Investors have fallen out of love with India’s biggest firm. A large acquisition abroad could be its next move
Aug 13th 2011 | MUMBAI | from the print edition Economist
THE story of Reliance Industries (RIL) is almost folklore in India. It was founded in the late 1950s by the late Dhirubhai Ambani, a former petrol-pump attendant. He had made his first fortune in the port of Aden, in what is now Yemen. He spotted that local coins had a face value less than the value of the silver from which they were made. So he bought every coin he could, melted them down and pocketed the difference. “I don’t believe in not taking opportunities,” he said, according to his unofficial biographer, Hamish McDonald.
Over the following four and a half decades Ambani took plenty more chances, making bets on vast projects and using brawn and guile to deal with officials and politicians. Today RIL is a conglomerate active in energy, refining and petrochemicals, with a market value of $55 billion, or a tenth of the worth of India’s stockmarket. It is run by Mukesh (pictured), Dhirubhai’s eldest son and India’s shyest, richest and most powerful businessman.
The Ambani family and friends still own 45% of RIL. But other shareholders have played a vital role. They bought into the Ambani dream and helped pay for it. The firm’s annual general meeting is still an evangelical affair, where the faithful speak of Dhirubhai as a saint, cheer his daughter-in-law, who sits in the front row, and listen devoutly to Mukesh.
Such devotion was not built on sentimentality. RIL used to deliver superb returns: its share price rose from less than 20 rupees in 1991 to 1,610 rupees in January 2008, after adjusting for splits (but not inflation). Since then, though, and particularly in recent months, they have slumped. At the most recent AGM in June some attendees grouched about the stock price and low dividends; today, with the shares at 770 rupees, they might be grumpier still.
Part of the malaise reflects unrealistic expectations—the firm is now so big that it cannot possibly grow as fast as before. But it also mirrors RIL’s return on capital, which has drifted down towards single figures (see chart 1). Its shares are trading at their lowest multiple of profits and book value for at least five years, except for a few months during the 2009 financial crisis (see chart 2). Though RIL’s motto is “growth is life”, its valuation implies that the years of plenty are over.
Is this fair? RIL has no net debt to speak of and enviably high market shares in petrochemicals. It is in far better shape than the indebted and scandal-dogged empire of Mukesh’s brother, Anil, who after a poisonous spat parted from RIL in 2005, taking the telecoms, power and finance arms with him. And there is still growth in the pipeline. Of RIL’s main business lines, refining is chugging along, and the firm is investing to double the size of its petrochemicals unit. Add in RIL’s nascent shale-gas projects in America, and gross operating profit from these activities could double to $11 billion in three or four years.
That still leaves another big strut: Indian gas and oilfields, mainly off India’s east coast. Technical glitches over the past year in the flagship KG-D6 block have seen production fall, dashing hopes for bumper profits in the short term, says Somshankar Sinha of CLSA, a broker. But there is some comfort from the decision by BP in February to pay $7.2 billion for a 30% stake in 20-odd RIL fields, implying that RIL’s stake was worth about $15 billion. The British oil giant is accident-prone but not stupid.
Tot up all of the above and RIL’s shares look undervalued. An important factor may be that the pool of potential outside investors has shifted from Indian individuals to institutions and foreigners, who are typically sceptical about the long-term prospects of the refining and petrochemical industries, which have a lousy track record in most countries. They also take a dim view of opaque conglomerates.
Here, RIL has not helped itself. Perhaps a sixth of its assets sit in non-core investments other than cash. Some of these capers, such as a $3 billion investment in mobile spectrum, look canny. Others, such as retailing, have sputtered. Outsiders face a mix of bombast about these new business lines and wobbliness. A year ago, for example, RIL was talking about building giant power stations; now it isn’t. The uncertainty is compounded by its balance-sheet. RIL could probably borrow $20 billion while keeping its gearing sane. In theory, Mr Ambani could blow the lot on vanity projects. Such a bender is wildly improbable, but the possibility spooks some.
Part of the cure for RIL’s malaise is to complete the leap from Indian champion to global blue-chip, which means more professional managers and less clannishness, improvisation and opacity. That would please institutional investors. It would also make the succession less fraught. Mr Ambani is 54. If he retires when he is, say, 70, or dies before then, his children, who are still young, may not be ready to take over immediately.
A cultural makeover won’t be enough, though. RIL still must decide how to deploy its spare cash. It could invest more heavily at home—drilling its gasfields more quickly, for example. But the problem is that Reliance is now too big for India. A logical next step, reckons Sanjay Mookim of Credit Suisse, would be a big acquisition abroad, probably of a Western energy, refining or petrochemicals firm.
Mr Ambani is said to worry about overpaying. Rightly so: other big Indian groups that have gone global through acquisitions, while lionised at home, have made returns ranging from mediocre to dismal. Yet if RIL holds its fire and the shares stay depressed, pressure will rise to return cash to shareholders. That would run counter to the family tradition of investing for growth. The recent slump in markets may create bargains, but cross-border deals are risky. From trading coins, RIL must soon decide whether to start flipping them.
On Thu, Aug 18, 2011 at 7:00 PM, Siddanth Gupta <siddan...@gmail.com> wrote:18 Aug, 2011, 03.24PM IST, Reuters
Will Reliance Industries manage to regain top spot again?
Reliance Industries, for long the darling of Indian investors, was
knocked off its four-year long perch as the country's most valuable
company, as fears over slowing gas production dragged its stock down
almost 30 percent this year and led to the first full day of trade
with Coal India on top.
Reliance, owned by Mukesh Ambani, the world's ninth richest man, saw
its crown seized by Coal India , the world's largest coal miner, whose
stock in energy-hungry India is the best performer this year on the
country's top index .
Reliance has been under fire over the past few months from the
upstream regulator, investors and analysts due to slowing gas output,
sending its shares down over 29 percent this year, compared to an
almost 19 percent fall in the main index.
Analysts on Thursday talked down the chances of Reliance retaining its
top spot in the near future, due to Coal India's surging growth
outlook and margin worries across Reliance's other sectors, such as
refining and petrochemical production.
Fund manager JP Morgan Asset Management halved its holding in Reliance
between March and June this year. BlackRock Asset Management have
reduced its position by nearly 29 percent between March and April,
according to Thomson Reuters StreetSight.
UTI Asset Management have cut its positions in Reliance while
increasing its holding in Coal India. The two companies are separated
only by a thread. As of mid-day trade on Thursday, Reliance had a
market cap of 2.45 trillion rupees ($54 billion) while Coal India's
market cap stood at 2.49 trillion rupees ($55 billion).
COAL HEATS UP
State-owned Coal India has surged in Asia's third-largest economy,
which aims to halve its peak-hour power deficit of nearly 14 percent
in two years by ramping up generation. The miner accounts for nearly
80 percent of India's coal output.
The Kolkata-based miner has seen its shares rise over 25 percent this
year, after the Indian government sold a 10-percent stake for $3.4
billion in the country's largest IPO ever last November.
Templeton Asset Management, Blackstone Group and Allianz Global
Investors are among funds that have expanded their portfolios to
include Coal India since April, according to Thomson Reuters
StreetSight.
India is likely to import 135 million tonnes of coal this fiscal year,
to meet a forecasted 11-percent rise in demand, and Coal India is in
talks for acquisitions in Indonesia, Australia and the United States.
Reliance, which became India's largest company by market
capitalization in February 2007, is looking to expand beyond its core
businesses into telecom, financial services and in June said it
planned to invest aggressively in retail.
Results from the fiscal first quarter showed a 16.7 percent rise in
net profit last month, but analysts cautioned of a peak in refining
margins and predicted further slowdown in its oil and gas business,
which already lag estimates. In May, India's upstream regulator called
on Reliance to drill two extra wells this fiscal to meet gas
production targets at a flagship block off the country's east coast.--
Form is Paramount
Price is Approximate
Time is Least Reliable
- Bob Prechter
Karishma
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RAJESH DESAI
New sellers- housewives
Reliance Retail is literally coming to your doorsteps! It has come up with a new technique to sell their products; they have begun door to door selling through housewives and housing societies to boost their sales. This technique helps housewives earn some additional income by selling Reliance products such as Sudz detergent, Amara soap and Healthy Life food items.
Reliance Home Products has launched a Home Club initiative on a testing basis to sell products at 30% discounted rate through housewives at their doorstep. The housewives will earn 10% of the sales amount as commission. This technique will not only exhaust the products in the inventory, but sell products at wholesale prices while creating a new sales channel.
Reliance Retail is the first national retailer to try direct selling and while the company is now targeting housing societies in Navi Mumbai, this pilot test might soon create a whole new sales channel across country. One does not know if the scheme is like Amway, like a Ponzi scheme but surely another ‘first’ for Reliance.
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EIA has without protest accepted the new estimate and will be incorporating the same in its own model. The extent of variation is ridiculous since it is this data on the basis of which policies regarding energy security are set and companies form their strategies. The recent development has led to questions regarding the validity of agency estimates. Given that shale gas is being glorified as the fuel of the future, this development should hopefully be an eye opener and lead to more transparency in how estimates are calculated.
source EQMASTER
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RAJESH DESAI
Reliance Is Said Likely to Miss Drilling Target at Biggest India Gas Field
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Reliance has plunged 29 percent in Mumbai trading this year and briefly lost its position as India’s biggest company by market value last week as gas output from the block off the east coast declined. Photographer: Adeel Halim/Bloomberg
Reliance Industries Ltd. (RIL) will probably miss a target of drilling 11 new wells at India’s biggest natural gas deposit by March 31, a person with direct knowledge of the matter said.
Two new wells have been drilled and Reliance is studying locations for the next well, the person said, asking not to be identified because he isn’t allowed to speak to the media.
Reliance has plunged 29 percent in Mumbai trading this year and briefly lost its position as India’s biggest company by market value last week as gas output from the block off the east coast declined. The company, controlled by billionaire Mukesh Ambani, plans to boost output by tapping expertise from BP Plc (BP/), which agreed to buy stakes in 23 Reliance oil and gas fields for $7.2 billion in February.
“The uncertainty over when Reliance will be able to raise production continues,” said Prashant Kamdar, an analyst with Guiness Securities Ltd. in Kolkata. “Gas production is the major overhang right now. They will only be able to raise production when they can drill more wells.”
Reliance completed drilling the second well at the KG-D6 block this week, the person said. A rig called Dhirubhai Deepwater KG2 has been leased to Malaysia’s Petroliam Nasional Bhd. until it’s needed to drill the third well, which may not be for at least another three months, he said.
Manoj Warrier, a spokesman for Reliance, declined to comment on the drilling program or the rig lease when reached on his mobile phone yesterday.
Gas Production
Reliance fell 0.5 percent to 750.10 rupees at 9:21 a.m. in Mumbai trading, compared with a 0.1 percent increase in the benchmark Sensitive Index.
Gas output has dropped to 45 million cubic meters a day currently, the person said. Production from the KG-D6 block averaged 48.6 million cubic meters a day in the three months ended June, R.P.N. Singh, junior oil minister, told parliament on Aug. 2.
The decline in output may continue until work on the wells is completed and they are connected to the main pipeline system carrying the gas, according to a statement yesterday from Calgary-based Niko Resources Ltd. (NKO), which has a 10 percent stake in the KG-D6 block.
The block started in April 2009 and reached 60 million cubic meters a day in June last year, according to Reliance filings. Production dropped because of technical issues, the company said, without elaborating. The field was expected to produce as much as 80 million cubic meters a day, more than doubling India’s domestic gas supplies.
The Indian government asked Reliance to drill 11 wells in the year ending March 31, S.K. Srivastava, director general at the country’s oil regulator, said May 2.
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkat...@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at apra...@bloomberg.net
The Delhi High Court today said that it will constitute a special bench to hear the case of allegations against Mukesh Ambani's Reliance Industries Ltd (RIL) of irregularities in exploration of gas in Krishna Godavari basin.
The decision was taken by Chief Justice Dipak Misra when Justice Sanjiv Khanna, who was sitting with him on the bench rescued himself from hearing the case.
Justice Khanna, however cited no reasons for his recusal.
A petition has been filed by a scribe M Furquan seeking cancellation of the licence granted to the joint venture of Mukesh Ambani's RIL and Nico in exploration of gas in Krishna- Godavari basin.
Urging the court to intervene and direct the Government immediately to take over the control and management of the Krishna Godavari Project from RIL- Joint Venture (JV), the petitioner said that serious violations of rules were being committed in the exploration of KG basin.
The RIL-JV cheated the government by inflating the expenditure as there was a provision in the revenue sharing agreement that RIL is entitled to recover all expenses before sharing it with the government, Mr Furquan alleged.
The Court will constitute a special bench to hear the matter by next week. UNI
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RAJESH DESAI
The decision was taken by Chief Justice Dipak Misra when Justice Sanjiv Khanna, who was sitting with him on the bench rescued himself from hearing the case.
Justice Khanna, however cited no reasons for his recusal.
A petition has been filed by a scribe M Furquan seeking cancellation of the licence granted to the joint venture of Mukesh Ambani's RIL and Nico in exploration of gas in Krishna- Godavari basin.
Urging the court to intervene and direct the Government immediately to take over the control and management of the Krishna Godavari Project from RIL- Joint Venture (JV), the petitioner said that serious violations of rules were being committed in the exploration of KG basin.
The RIL-JV cheated the government by inflating the expenditure as there was a provision in the revenue sharing agreement that RIL is entitled to recover all expenses before sharing it with the government, Mr Furquan alleged.
The Court will constitute a special bench to hear the matter by next week. UNI
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Reliance Footprint to double its outlets via franchising
Aug 31, 2011
Reliance Footprint, the footwear speciality store from Reliance
Retail, is planning to double its number of stores in the next six
months. The company is looking to expand via franchise route, according
to its top official.
Reliance Footprint CEO Gopalakrishnan Sankar, said, “We are present in
37 cities across 15 states with 53 stores and want to expand our
business to Tier II cities in the coming years.”
“The company has taken the franchisee route to expansion and will soon
open its first franchisee store in the Calicut,” Sankar said, claiming
that the overall market is growing by 15 per cent but Reliance Footprint
is growing by more than 100 per cent.
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RAJESH DESAI
Reliance Industries (RIL) today announced completion of its 30% stake sale in 21 oil and gas blocks, including the showcase KG-D6 block , to British energy giant BP Plc for over USD 7 billion.
Industrialist Mukesh Ambani-led Reliance Industries said in a statement that the completion of the deal has paved the way for commencement of its strategic alliance in India with BP.
"This significant step will commence the planned alliance which will operate across the gas value chain in India, from exploration and production to distribution and marketing.
Reliance Industries overtakes ONGC as most-valued company
"The completion of the deal delivers one of the largest ever foreign direct investments into India," RIL said.
RIL will get USD 7.2 billion for the stake sale in 21 blocks and could get further USD 1.2 billion as performance payments based on exploration success resulting into development of commercial deliveries.
Commenting on the completion of the deal, RIL Chairman and MD Mukesh Ambani said: "The alliance with BP will boost our efforts to realise the true potential of India's hydrocarbon reserves."
"The globally renowned expertise of BP and the in-depth domestic experience of Reliance make for a formidable alliance which will deliver unparalleled value for the country in its pursuit of energy security," he added.
RIL said that the two companies would also form a 50-50 joint venture for sourcing and marketing of gas in India which will also accelerate the creation of infrastructure for receiving, transporting and marketing natural gas.
BP Group CEO Bob Dudley said: "This major investment is directly aligned with our strategy of creating long-term value by forming alliances with strong national partners, gaining material positions in significant hydrocarbon basins and increasing our exposure to growing energy markets."
RIL is India's largest private sector company with a turnover of Rs 2,58,651 crore (USD 58 billion) and net profit of Rs 20,286 crore (USD 4.5 billion) in the last fiscal ended March 31, 2011.
It had on February 21 agreed to sell 30% stake in 23 out of its 29 oil and gas blocks to BP.
Earlier this month, the company said that it has received the government approval for sale of stake in 21 blocks.
However, the approval has been held back for two blocks -- one a deep sea area off the Orissa coast and the other an onland block in Assam -- over technical issues.
Regarding the two remaining blocks, valued at about USD 2.2 million, RIL said the discussions were continuing with the government and a decision was expected "at a later date".
RIL said the 21 blocks include the KG D6 block that produces about 1.7 billion cubic feet of gas per day, which was over 40% of India's total gas output.
RIL would remain operator of the Production Sharing Contracts (PSCs) and BP will bring its global deepwater, sub-surface and gas expertise to enhance exploration and development of the blocks.
The total value of the deal could rise to as much as USD 20 billion on the basis of future performance payments and investment and would give Reliance access to BP's expertise in deepwater drilling and accelerate development and production from its fields, particularly the KG-D6 block.
RIL might also use BP's deepwater expertise to tackle the technical issues in the KG-D6 block.
RIL is the operator in all 23 blocks, while Canadian firm Niko Resources and UK's Hardy Oil have minority 10% interest in a few. After the deal, RIL's holding in the blocks will come down to 60-70%. 19 out of the 23 blocks lie off the East Coast, while two blocks are in Assam and Gujarat.
Niko has 10% interest in the KG-D6 block and after the BP deal, RIL's stake would fall to 60%.
Besides KG-D6, RIL's second biggest discovery block is NEC-25, off the Orissa coast. It has so far made 15 exploratory successes in the block, where Niko holds a 10% stake. Following the BP deal, RIL's stake in this block will fall to 60%.
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RAJESH DESAI
Sanjeev Prasad's 5-point plan for lifting sentiment for RIL
When Sanjeev Prasad of Kotak Securities takes a call on Reliance Industries , fund managers sit up and take notice. And it is said, so does the company. Over the years, Prasad has acquired cult status among the analyst community for his bearish calls on Reliance Industries. More than his assessment of the company's business and the operating environment, what has earned him the respect of peers and fund managers is his bold criticism of some of the hazy practices/disclosure standards of the petrochemical giant. After being negative on the stock for a long time, the 42-year old executive director and co-head at Kotak Institutional Equities has now reversed that view, and is advising clients to load up on the stock.
Here are five things that Prasad feels could improve investor sentiment for the stock, as said in the Kotak report dated August 29.
Clarity on use of cash: We would suggest RIL actively look at increasing dividends and/or buying back its shares as a way to shore up investment sentiment for the stock. RIL does not have any meaningful planned capex for now and acquisitions are rarely inexpensive or value-accretive.
Cancel treasury shares. This would optically increase RIL's EPS by 9.8% (3,273 outstanding shares versus 2,981 shares without treasury shares). More important, it would remove a potential source of overhang (As Reliance has sold treasury shares in 2009 and 2010).
Simplify company structure: In our view, RIL can simplify its structure by (1) merging several investment subsidiaries with itself, (2) cancelling outstanding treasury shares (3) merging entities of the major shareholder, which are in the same line of business, with RIL and (4) reducing the number of subsidiaries in new segments.
Disclosures on sales volumes, margins and capex: We believe the Street would welcome additional disclosures on sales volumes, realizations and margins of key products. RIL does not currently disclose sales volumes of key products; it has never done so historically. We do not find current information on capex relevant or adequate and would welcome additional disclosures on capex in the 'normal' manner. We note that RIL has stopped disclosing quarterly breakdown of capex since 4QFY08.
More conservative accounting policies: We would advocate adoption of Successful Efforts Method of Accounting for the E&P segment compared to the current Full Cost Method of Accounting. Almost all global E&P companies follow the former.
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Reliance Industries hopes to profit with BP expertise, gas price revision in 2014
NEW DELHI: Reliance Industries and global oil major BP hope to significantly boost natural gas output from the country's largest gas field in the D-6 block in the next two to three years, and make handsome gains, as gas prices are due for revision in 2014, industry officials said.BP last week completed its $7.2-billion deal to acquire 30% stake in Reliance's 21 oil and gas blocks, including D-6 where natural gas output has fallen sharply as the reservoir turned out to be different from what the company had initially envisaged on the basis of surveys.
Output was expected to ramp up the output to 80 million metric standard cubic meter per day (mmscmd) but it peaked at 60 mmscmd and fell below 50 mmscmd because of technical issues, sparking concerns among investors and analysts, and encouraging Reliance to bring BP as a partner to gain from the oil major's expertise in complex and deep-sea fields.
"With the BP deal, RIL's gas production is expected to rise to targeted levels and even higher. But the nature of the industry is such that production does not rise overnight.
It will take two or three years," a source close to the company said. He said apart from higher output, the company would also gain from revision in prices of natural gas in India. The price of natural gas from the D-6 field has been fixed at $4.2 per unit for a period of five years from the start of production. The price would be reviewed in 2014.
India has a growing number of industrial consumers who are willing to pay much higher prices for gas if it is available. In the first quarter of the current fiscal year, LNG imports more than made up for the drop in domestic gas supply. Imports of LNG jumped 68% even though imported gas is sold at a price more than three times the local supply.
Reliance's D-6 gas output fell 18.8% in the April-June quarter, but LNG imports helped the country's total gas consumption rise to 181 mmscmd from 177 mmscmd in the year-ago quarter. Higher prices of gas will have a significant upside for the company.
In the first quarter of the current fiscal year, Reliance's oil and gas division accounted for barely 4% of the conglomerate's revenue, but contribution to profits was significantly higher, with the segment accounting for 21% of EBIT. Analysts said BP's investment of $7.2 billion would have been finalised only after a detailed assessment of the blocks and the oil major would be confident of recovering its investment and making a profit out of its 30% share in the output from the block.
The upside for Reliance, which has the majority stake, would be proportionally higher. Investors are concerned about the CAG's adverse remarks about the company, which contributed to its shares falling to .`713.25 in late August from a 52-week peak of Rs 1,187 in November last year.
Analysts are awaiting the final report of the auditor, which according to CLSA may be much milder than the draft report and trigger a rally. Most analysts are bullish about medium term prospects of the stock. "We are confident about RIL ramping up its production with the help of BP's deepwater technology and expertise in the medium term.
The upstream segment still has a significant upside in store, considering the huge untapped resources," Angel Broking said in a research report. Reliance also aims to become an integrated gas major with presence in the entire gas business including LNG imports, gas pipelines and distribution infrastructure. The company plans to form an equal joint venture with BP for gas marketing. ...eco times,
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BP may take 2 years to raise output at RIL's D6 block
BP Plc is confident of raising output from the key gas field of Reliance Industries Ltd in about two years, a senior executive at the British company said on Tuesday.
In July, India's cabinet had approved Reliance's plan to sell 30% stake in 21 oil and gas blocks to BP as part of a USD 7.2 billion deal, making it one of the largest investments in India's oil and gas sector.
"We have just received the approval. We are studying the data. We are confident that there is more gas and output can be raised. But these things take time, it may take a couple of years," BP India head Sashi Mukundan said.
Reliance Industries, the country's largest listed firm, has been under pressure over the past few months from an industry regulator and investors over slowing gas output from its main D6 block in the KG basin off the Andhra Pradesh coast.
In May, the director general of hydrocarbons said the company was producing 48 mscmd (million standard cubic metres per day of gas) from the block, lower than 60 mscmd it produced last year and far off the planned peak capacity of 80 mscmd.
But India's approval of Reliance's plan to sell stake in some oil and gas blocks to BP is expected to aid the Indian company in boosting output from the deepwater blocks.
Shares in Reliance rose as much as 3.6% on Tuesday in the Mumbai market that was up 0.6%. The stock is down more than 20% so far this year, mainly triggered by concerns about slowing D6 output.
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Hold Reliance Industries , says Ambareesh Baliga, COO, Way2Wealth.
Baliga told CNBC-TV18, "We were buying Reliance Industries at Rs 950; we were buying at Rs 800-840 and also buying at Rs 760. So at this point of time I am just asking my investors to hold on because when it was closer to Rs 750-760 levels I think people were also talking of Rs 600-650 levels. We had said keep enough cash in case it comes to those levels, you should buy more because even at the current levels there is a decent value of the stock."
He further added, "We are still suggesting that if you do not have any portfolio then even at these levels one should be buying because our long term target, if you are talking of next 15-18 months, we are still talking about Rs 1350-1400."
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Ambani Aims Beyond India With Reliance Industries’ $16 Billion Cash Hoard
Mukesh Ambani doesn’t do small. He is the richest man in India. His company, Reliance Industries Ltd. (RIL), operates the largest oil refinery complex ever built from scratch.
And late last year, he moved into one of the planet’s most expensive private homes. The 27-story apartment features a spa, a 50-seat movie theater and a rooftop heli-pad -- all for six residents: Ambani, his wife, his three children and his mother.
Ambani’s clout permeates India and beyond, Bloomberg Markets magazine reports in its October special issue on the 50 Most Influential people in global finance. He and his family own more than 45 percent of Reliance Industries, among the country’s largest companies by market value and the world’s leading manufacturer of polyester. The stake was valued at $26.7 billion on Sept. 7.
Bank of America Corp. (BAC) named Ambani a nonexecutive director in March, the first person from outside the U.S. that the Charlotte, North Carolina-based bank has ever nominated to its board.
A relentless India advocate, Ambani, 54, has committed his company -- through its philanthropic Reliance Foundation -- to building a new university and an engineering academy in a country where half the population is younger than age 25.
Money Magnet
Ambani is a magnet for the planet’s moneymen, especially since he settled an infamous dispute with his younger brother Anil. Reliance will have more than $16 billion in cash on its balance sheet by year’s end -- one of the top 30 cash hoards for nonfinancial firms anywhere, according to data compiled by Bloomberg.
“Every investment banker in the world who knows what is going on has his number and is calling him,” says Jon Thorn, manager of the $335 million India Capital Fund Ltd., which holds Reliance in its portfolio. Ambani declined to comment for this story.
Reliance plays an unparalleled role in an economy that’s among the fastest-growing emerging markets and home to almost a sixth of the world’s people. With interests from oil and gas to retail and biotech, the company makes up 10 percent of India’s benchmark Sensex index. Annual revenue of $58 billion represents 3.6 percent of India’s gross domestic product.
“Reliance has a tremendous amount of impact on the economy,” says Susanta Mazumdar, manager of T. Rowe Price Group Inc.’s Global Infrastructure Fund. As of July 31, T. Rowe Price held 11.2 million shares -- or 0.34 percent -- of Reliance, divided among almost a dozen portfolios.
Like Buffett
Ambani’s annual shareholder meeting, like the confab hosted by fellow billionaire Warren Buffett, draws thousands to hear the sage words of the chairman -- and to pepper him with questions. Recent topics ranged from whether Reliance should raise its dividend to the quality of the free ice cream that Reliance offered to attendees.
The town-hall style show isn’t the only similarity between Ambani and Buffett. Like the American investor, Ambani is a dedicated bargain hunter who has a history of not overpaying for acquisitions.
Even with Reliance’s pot of cash, there was some hand- wringing at this year’s meeting: Shares sagged 21 percent in 2011 through Sept. 7 as investors worried that Reliance would miss gas production targets, says Sanjeev Prasad, an analyst at Kotak Institutional Equities in Mumbai.
To help boost production, Reliance teamed up with BP Plc (BP/) in February, selling it a 30 percent stake in 21 oil and gas blocks for $7.2 billion.
Spreading Influence
As India grows and Reliance becomes increasingly global, Ambani’s influence is only likely to spread. Those who know him say he’s a man of soaring ambition infused with national pride.
“If people say, ‘In India, you can’t do this,’ then he thinks, ‘I’ll show you,’ and he wants to do it better than the rest of the world,” says Akhil Gupta, chairman of the Indian arm of private-equity firm Blackstone Group LP (BX) and a close friend.
This explains Ambani’s massive refinery and colossal residence. The high-rise, while designed by an American firm, subscribes to Vastu Shastra, a Hindu system of directional precepts similar to Chinese feng shui.
Ambani, unlike some of India’s business elites, is not infatuated with the customs of Western moguls. He often speaks in Gujarati, the native tongue of his family, instead of English. He prefers South Indian street food to sushi and hasn’t acquired a taste for wine. On visits to New York, he shops at Macy’s for his favorite khakis.
Rite of Passage
Gupta first met Ambani in Stanford University’s MBA program in 1979. Ambani never completed his degree. After his first year, his father, Dhirubhai, summoned him home to oversee construction of a polyester mill. It was a rite of passage in his journey to the top of Reliance, founded as a spice shop in 1958, the year following Mukesh’s birth.
“Reliance has always historically based itself on the single principle that Indian growth is going to be terrific and it is going to be permanent so we should be part of it,” Thorn says.
Following Dhirubhai’s death in 2002, Ambani feuded with Anil over Reliance’s direction. In 2005, the company split roughly in half, with Mukesh retaining control over refining, petrochemicals, oil and gas and textiles, while Anil took newer businesses in telecommunications, asset management, entertainment and power generation. A noncompete agreement kept them on their own turf.
Brothers Make Up
The brothers settled a legal dispute over sharing natural gas and dissolved the noncompete pact last year. Now Mukesh is moving back into telecommunications, acquiring Infotel Broadband Services Ltd., which has rights to provide broadband wireless in India, for $1 billion in June 2010.
Ambani is also pushing into financial services. In March, he launched an Indian joint venture with U.S. investment company D.E. Shaw Group. In June, Reliance paid an undisclosed sum to Bharti Airtel Ltd. (BHARTI) for a 74 percent stake in two joint ventures with France’s AXA Group that sell insurance in India.
It has been slower going outside India. Reliance failed to acquire bankrupt petrochemical company LyondellBasell Industries NV. (LYB) It also lost out to BP in buying Value Creation Inc., a Canadian oil sands company, although it did purchase stakes in U.S. shale gas sites through three joint ventures.
Those who know Ambani say they expect him to be very cautious making acquisitions with Reliance’s cash.
“He generally believes in building, not buying,” Gupta says.
Whatever Ambani builds makes an impression -- on the Mumbai skyline, on India, and, increasingly, on the rest of the world.
To contact the reporter on this story: Jeremy Kahn in London at jka...@bloomberg.net
To contact the editor responsible for this story: Laura Colby in New York at lco...@bloomberg.net
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The Comptroller and Auditor General of India (CAG) in its report on Thursday said Reliance Industries violated terms of its production sharing contract (PSC) for its blocks in the KG Basin off the Andhra Pradesh coast.
The report criticised the manner in which the contract has been worded, giving incentives to the contractor to frontload expenses and thereby, postpone and reduce the revenues for the government. However, analysts don't seem to be agreeing with the CAG report to a great extent. In fact, they feel that the authority has little knowledge about deep sea drilling.
To RS Sharma, former chairman of ONGC, whosoever has carried out the audit, is not familiar with the practice and does not know how production sharing contracts have been. "They have gone strictly by an auditor’s mindset in a typical government environment. They should first try to understand how the industry operates globally, and how the production sharing contracts operate," he says.
Petroleum journalist Raghavan Sasankan points out that without the consent or sort of indirect support from bureaucracy or the political leadership, Reliance or any other company cannot operate production sharing contract and make money out of it.
Agreeing with Reliance's justification on inflated expenses, Deven Choksey, managing director of KR Choksey Securities, says, "Oil prices have moved up in the global markets, leading to a hike in exploration costs. So, the company has a justified point that they had to spend this money, otherwise, this particular well would not have got developed."
According to Narendra Taneja, South Asia bureau chief of Upstream, deep water development is a very serious business and a lot of effort goes into even finding a rig as there aren't too many available. He urges the related bodies to not play politics as by doing so they would be compromising with the future of the oil and gas industry in India.
Sharing his view, Sharma says, the report has created huge damage to the entire production sharing regime. "The total exploration acreage, that the NELP regime had, had a lot of global companies showing interest. Going by the tone of this report, I don't think anybody will try to think of coming and exploring in India," he points out.
"Indian companies have very little experience to develop such projects. Reliance, even today, does not have the expertise to develop deep water project. They had to source practically every single thing from overseas. That is why they have brought in British Petroleum," Taneja says.
"When you have to go deep into the ocean, develop such a difficult project and then there if you keep in mind how CAG is going to report, because they are going to questions I cannot bring in the best technology, I cannot bring in the best men, then how are you going to develop deep water exploration project," he added.
RIL still sailing safe
There is nothing quite damaging for RIL, says Sasankan. "The USD 200 billion cost that has allegedly been inflated is an insignificant amount considering the size of Reliance's operation—this is questionable. Also, we don't have a proper regulator in India—the Director General of Hydrocarbonate (DGH) is only an extension of the Ministry of Petroleum and Natural Gas. So an ill-equipped regulator, the size of the deep water operation which RIL is doing and inflation of certain expenses, are not serious charges."
However, Jagannadham Thununguntla, equity head at SMC Capitals thinks otherwise. "RIL has already been going through a tough phase in terms of news flow and data flow. If the report leads to closure of any of RIL's wells, it should be a big negative for the stock. But having said that I think the BP is technical expertise in getting the gas," he says.
Chikita Kukreja
chikita...@network18online.com
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CAG report on RIL highly damaging for India: RS Sharma
Play Video Sep 08, 2011 at 11.05 PM (Source: CNBC-TV18)The Comptroller and Auditor General's (CAG) final audit report on Reliance Industries (RIL) says Reliance Industries violated the production sharing pact, but the DGH and Petroleum Ministry are equally to blame being ill-equipped to oversee the production sharing contract.
In an interview to CNBC-TV18, RS Sharma, former chairman of ONGC discusses the report.
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Also read: CAG report on RIL: Will it taint India's credibility?
Below is the edited transcript of the interview. Also watch the accompanying video.
Q: Production sharing contracts are very complex, most people will not understand them but you do. Do you believe that there is merit to what the CAG has said in its findings?
A: Let me clarify, I have seen the draft report. I have not seen the final report. The draft report was about the performance audit of the production sharing regime. Initially, they had taken up 20 contracts and finally they picked up four representative contracts. They had taken Panna-Mukta and Tapti, the discovered fields. Then they took one pre-NELP block Barmer Rajasthan field and one 98X3 NELP block. This report is equally critical of all the areas.
As per the draft report, they were highly critical about the operator for Panna-Mukta, Tapti field. I don’t know why media has been only carrying out reports about Reliance. I find it equally damaging for all of them. I am using the word ‘damaging’ because I feel that whoever has carried out the audit is not familiar with how these production sharing contracts operate globally elsewhere in the world.
Q: In the draft report CAG suggested that there was goal platting of capex. It doesn’t talk just about Reliance; it talks about Cairn, Panna-Mukta and Tapti fields as well. The CAG says that you must stick to the initial development plan or before carrying out any sort of activity you must get the initial development plan appraised by the government, the DGH. It has faulted both the government as well as the DGH in performing that duty. What is your view on this initial development plan and cost over runs because that runs through in all the four cases?
A: I wish they had also taken up ONGC blocks because ONGC has also been doing explorations. One has to see that in the last four-five years the oil prices have gone through the roof. When APM was dismantled the price was USD 18 a barrel and that was in April 2002.
Thereafter we have seen oil prices constantly moving up. In the last three- four years the way crude prices have gone up there is a exponential increase in exploration and production activity all over the world especially in the deep waters. So much so that ONGC was not able to hire deep water rigs for three-half-years.
The rig moratorium had been given based on the global practice at the level of Cabinet. Costs have also gone up exponentially. Giving a blatant statement that there has been goal plating and all costs have gone up three times, I don’t think it is right to say.
There could have been some abrasions, I am nor privy to those things. As far as my experience in ONGC is concerned; we have also witnessed costs and rig charter hire rates going up, three times than what they were in 2004 or 2005.
Q: The CAG suggests or recommends the government to change the way the production sharing contract is signed between the government and operators. It’s says private contractors have inadequate incentives to reduce capex, private contractors have substantial incentive to increase capex. What is your view on this?
A: If you do further tweaking in the draft PSC contracts, I don’t think any foreign bidder will come and invest in our country. We must realise that we are not so well endowed like Russia, Venezuela. These regimes can afford to be arrogant. India cannot afford to be arrogant. Infact 80% of our sedimentary basis are either under explored or not explored at all. We need huge amount of this risk capital investment.
Q: So, according to you we require investment in the E&P space in India. But at the same time is there no merit in what the CAG is recommending from a point of view of the government's share of profit?
A: I have also been dealing with CAG for decades and we have huge respect for the institution. It has always been that the initial draft reports by the auditors have been out-and-out negative. Only after they have had discussions with the management, and see the rationale, they dilute their stance.
I am not aware what process has gone into these cases, whether those who carried out the audit at CAG had exposure or understanding of the global practices, whether they concealed the responses given by the management before finalising the report. But apparently what I see, as an industry expert, and now as an outsider, I feel that this kind of report is going to highly damaging for our foreign investor sentiment.
Q: You believe this report is going to be highly damaging.
A: This highly negative report is going to taint India's image as an investment destination for oil exploration.
Q: But some of the recommendations that they have made with respect to the production sharing contracts saying that you need to revisit the formula and protect the GoI's share of profits; that the government oversight in control of high-value procurement is very limited; that the government's oversight restricted to the representation in management committee. Do you believe that there is some merit at least in some of these areas that the CAG is pointing out and perhaps we do need to make such systemic changes?
A: These merits will hold good in regimes like Venezuela and Russia. They have changed the signed contracts. I don't see any example any where in the world where the signed contracts would have been changed. I don't think that is feasible, not even legally.
Don't Miss: Peeved by CAG's report on RIL, experts say co future safeTraders Push Bearish Bets on Reliance Options to 2-Year High on Gas Output
Options traders are the most bearish on Reliance Industries Ltd. (RIL) in two years as India’s biggest company by market value faces a decline in natural-gas production that may take two years to reverse.
The ratio of outstanding puts to sell the shares versus calls to buy reached 1.43 yesterday, the highest open interest ratio since October 2009, data compiled by Bloomberg show. Reliance has dropped 21 percent this year, compared with a 16 percent slide in the benchmark BSE India Sensitive Index.
The company, controlled by billionaire Mukesh Ambani, has been struggling to reverse a decline in gas production from the KG-D6 block, which has reduced supplies to power generators and fertilizer producers in Asia’s second-fastest growing major economy. Boosting output may take a couple of years, Sashi Mukundan, the head of BP Plc’s India unit, said Sept. 6. BP owns 30 percent of the reservoir.
“Traders are buying protection as stocks may cool off on falling gas output,” said Yogesh Radke, analyst with Edelweiss Financial Services Ltd. in Mumbai. “An addition of 200,000 shares yesterday in the 780 rupees and 800 rupees strike shows negative momentum.”
Reliance shares fell 1.6 percent to 838.6 rupees at 11:23 a.m. in Mumbai, ending three days of gains. The stock touched a 29-month low of 719.4 rupees on Aug. 26. Reliance last month briefly lost its position as India’s most valuable company.
A call option gives investors the right to buy a security at a set price by a specific date. A put option gives the right to sell. Investors use options to guard against fluctuations in the prices of securities they own, speculate on share-price moves or bet that volatility will rise or fall.
To contact the reporters on this story: Santanu Chakraborty in Mumbai at schakr...@bloomberg.net; Rakteem Katakey in New Delhi at rkat...@bloomberg.net.
To contact the editor responsible for this story: Darren Boey at db...@bloomberg.net; Amit Prakash at apra...@bloomberg.net.
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research report is attached.
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| RIL, Siemens join hands to develop security solutions |
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Reliance Security Solutions, an arm of Reliance Industries Ltd (RIL), on Monday said it had signed a memorandum of understanding with Siemens to develop homeland security solutions for cities, highways and important buildings, among other things.
Reliance and Siemens would combine to leverage the 4G network for the low latency and assured quality of service required for video and security applications, RIL said in a release. Reliance said it had designed and operated the world’s largest integrated security automation system, consisting of 12,000 cameras, apart from thousands of other advanced sensors, radars and video analytics, among other things.
Siemens Building Technologies, a division of Siemens India, will bring its renowned security solution, Siveillance, to the venture. Siveillance is the family name of all elements of the security solutions portfolio from Siemens.
These solutions have been designed and developed at the Siemens R&D facility in Chennai.
Siemens is using these solutions at landmark buildings such as Dubai Police HQ, Doha 2006 Asian Games, Qatar, and Port of Rotterdam, Netherlands, according to RIL.
RIL has implemented advanced command and control centres for the security of its own critical infrastructure for more than a decade. It also has vast domain experience, with hundreds of security and safety professionals having background in defence, paramilitary and police, as well as internally trained resources.
On Reliance sp tulsiyan
As far as RILs advance tax for October goes, it is very difficult to take a call on what kind of treatment the amount received from BP will be given by RIL. I have been trying to collate the taxable profit or tax liability on that. One doesn’t what kind of depreciation has been claimed on the exploration assets by the company.
But this includes profit which will be taxed in this financial year on the amount received from them. Last year the company received Rs 9,000 crore from BP which was not offered as tax and has been shown as a current liability. The amount of Rs 35,000 crore which has already been received since the deal concluded will include tax.
I just can't take a ballpark figure of 15% or 18% or 20%. Even if I have to take 15% on that one will have to knock off an amount of anywhere close to Rs 4,500 to 6,000 crore from the amount which RIL will be paying.
Since it is a 30% instalment, it works out to be around Rs 7.5 crore having paid by them which includes larger share of taxable profits. These taxable profits will accrue on the BP deal on the amount of Rs 35,000 crore received by the company.
On Fri, Sep 16, 2011 at 1:58 PM, kuku manmohan <manmoh...@gmail.com> wrote:
It looks like a screaming BUYOn Fri, Sep 16, 2011 at 12:34 PM, taiyeb ali <taiyebal...@gmail.com> wrote:
RIL: Rs2000cr vs Rs1200cr..advance tax paid
On Thu, Sep 15, 2011 at 1:08 PM, karishma suvarna <karishma...@gmail.com> wrote:Reliance Increases Fuel Exports From India in August, Shipping Data Show
QBy Pratish Narayanan - Sep 15, 2011 4:30 AM GMT+0530Reliance Industries Ltd. (RIL), owner of the world’s biggest refining complex, increased exports last month from its plants on India’s west coast to at least 2.4 million metric tons of oil products, shipping data show.
Mumbai-based Reliance, India’s largest listed company, delivered the products from its Jamnagar facility in the state of Gujarat to destinations including the U.S., Europe, Brazil, Africa and the Middle East, according ship transmissions and vessel chartering tracked by Bloomberg and data from Clarkson Research Services Ltd.
The company’s oil-product exports in July were at least 1.3 million tons, according to data compiled by Bloomberg. Shipbrokers aren’t obliged to report charters, so the scope of data capture can vary from month to month. All figures from Clarkson are for single-voyage bookings and exclude long-term charters.
Reliance exported at least 910,000 tons of gasoline in August, with shipments headed to destinations including the Middle East, Singapore and Europe, according to transmissions captured by AISLive on Bloomberg and data from Clarkson Research, a unit of the world’s biggest shipbroker.
Manoj Warrier, a spokesman for Reliance in Mumbai, didn’t respond to an e-mail seeking comment. The company doesn’t disclose details of its oil-product exports.
Khawr Aladid
The company hired the vessel Khawr Aladid to transport 80,000 tons of gasoline to Europe from the port of Sikka near Jamnagar, vessel-charter data show. The ship sailed from the Indian port in late August and was last tracked in the Mediterranean Sea after passing through the Suez Canal, according to transmissions captured by Bloomberg.
Reliance’s gasoil, or diesel, shipments totaled at least 630,000 tons in August, with destinations including Brazil, Sri Lanka and Africa. Petroleo Brasileiro SA (PETR4), Brazil’s state- controlled oil company, hired the Swarna Kamal to transport 90,000 tons of the fuel to the Latin American nation, vessel- fixture data show. The ship left Sikka in early August and was last tracked near the coast of Brazil after sailing through the south of Africa, transmissions show.
Reliance also shipped at least 140,000 tons of jet fuel and 220,000 tons of naphtha to destinations including Japan and Europe, according to the data. The type of product couldn’t be determined for 530,000 tons that left Sikka during July.
Reliance, controlled by billionaire Mukesh Ambani, runs two refineries in Gujarat state. They can process heavy grades of crude and have a throughput of as much as 1.24 million barrels a day, accounting for about 1.6 percent of global refining capacity, according to the company’s website.
The company exports more products from its plants than state-owned rivals including Indian Oil Corp. and Bharat Petroleum Corp., which sell most of their fuels domestically.
To contact the reporter on this story: Pratish Narayanan in Mumbai at pnara...@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiat...@bloomberg.net
On Thu, Sep 15, 2011 at 7:52 AM, e pratyagatma <epa...@gmail.com> wrote:
RAJEEV JAYASWAL,ET BUREAU
Oil Min to decide on Reliance Industries $1.52-bn plan for KG-D6 satellite fields, plan to help RIL reverse decline in output
NEW DELHI: The oil ministry will shortly consider Reliance Industries' $1.52-billion plan to develop satellite fields in its KG-D6 block, which may deliver about 10 million metric standard cubic metres a day of natural gas in five years, government officials said.
The plan, if approved, will help Reliance reverse the decline in output from the deep-sea block and help consumers, particularly in the fertiliser and power sectors which are suffering as output from the D-6 block has fallen below 50 mmscmd instead of rising to 80 mmscmd because of technical problems.
After detailed examination of Reliance's optimum field development plan (OFDP) for four satellite fields in KG-D6, the Directorate General of Hydrocarbon (DGH) has sought approval of the oil ministry to convene a meeting of the block's management committee that will approve the budget, two DGH officials, who did not want to be identified, told ET. Each oil or gas block is managed by its management committee, which is represented by the energy firm and representatives from DGH and the government.
Stung by recent CAG report pointing at slackness in its overseer role, DGH is being extremely cautious. "Instead of directly convening the management committee meeting, it has sought the petroleum ministry's approval for that," one official said. DGH is the technical arm of the oil ministry.
DGH and the oil ministry did not respond to ET's email query. An SMS sent to director-general SK Srivastava remained unanswered. Officials estimated that peak production from the four satellite discoveries is expected to be in the range of 8-9 million standard cubic meters per day and production from the new pool is expected in next two years.
The RIL spokesperson declined comment. Officials at DGH said that the present optimum field development plan is a modified version of RIL's July 2008 proposal for integrated development of nine satellite discoveries in the block to produce 2.2 tcf gas with an investment of $5.91 billion.
After DGH found the proposal "non-viable" in March 2009, Reliance submitted the new proposal in December 2009 to develop four out of the nine satellite discoveries, the official added.
PAC, OIL MIN & CAG TO DISCUSS D-6
Petroleum Secretary GC Chaturvedi said the Public Accounts Committee of parliament will call officials of the oil ministry and the CAG to discuss the auditor's report on Reliance's D-6 block, reports Our Bureau from Mumbai.
"We could not put a number to the losses due to time and data constraints but in case the public accounts committee does ask us to furnish these details we will do so," he said. Discussions may focus on policy aspects of the CAG's recommendation, he added.
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Form is Paramount
Price is Approximate
Time is Least Reliable
- Bob Prechter
Karishma
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Best Regards,
Taiyeb Ali
786
Manmohan Tandan
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Reliance Industries today said it is planning maintenance and inspection shutdown of some units at its SEZ refinery in Jamnagar, starting from September 19 to 23.
The maintenance and inspection shut down would be done for Light Cycle Oil hydrocracker (LCOHC) and Vacuum Gas Oil hydrotreating unit (VGOHT) of SEZ refinery at Jamnagar refinery complex.
"These maintenance shutdowns will be for a period of approximately 4 weeks," RIL said in a filing to the BSE.
According to the company, the shutdown of these units is being planned for the first time since commissioning.
"Both the refineries at Jamnagar complex are planned to operate at maximum crude processing capacity i.e. 1.3 million barrels per day during this period.
"All other major processing units at the complex are also planned to operate at normal capacity," the filing added.
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Oil Min, DGH may lower RIL cost recovery at D1D3
Reliance Industries touched an intraday high of Rs 828 and an intraday low of Rs 808.10. At 12:25 hrs the share was quoting at Rs 810.70, down Rs 27.40, or 3.27%.
Oil Ministry and DGH may lower company's cost recovery at D1D3, reports CNBC-TV18, quoting sources.
Oil Ministry sources said that, RIL's cost recovery may be cut by USD 1.8 billion to USD 3.4 billion. The company has recovered USD 5.2 billion against expenditure of USD 5.6 billion.
The pro rata cost of current D1D3 output is at USD 3.4 billion. Need to work out modalities to reverse USD 1.8 billion to exchequer. However, there is no final decision yet on lowering RIL's cost recovery.
Reliance Industries gas output at D1D3 is 37 mmscmd.
However, company said that it has not received any communication from
Oil Ministry and DGH. They decline to comment on any such move.
Reliance in the dock: CBI may file case against the company
FP Staff Sep 20, 2011
The Central Bureau of Investigation may register a case or multiple cases against Reliance Industries Ltd (RIL) for alleged irregularities in its operations in the Krishna-Godavari (KG) basin, Mint newspaper reported today.
“The matter is at the inquiry stage and no information can be shared with the media,” said Dharini Mishra, spokeswoman for the agency, qouted the newpaper. A spokesperson for RIL declined to comment said the paper.
According to three CBI officials, none of whom wanted his identity to be disclosed, said the case will name officials belonging to the Directorate General of Hydrocarbons (DGH) and the petroleum ministry, the paper said.
A spokesperson for RIL declined to comment. Reuters
Preliminary inquiries are on in the issue, propped up by the report of the Comptroller and Auditor Genral of India (CAG) that found irregularities in RIL’s operation of the KG-DWN-98/3 block.
“The preliminary inquiry against RIL and others is in final stages and very soon a case will be registered,” the paper qouted one of the officials as saying.
The paper spoke to the three officials separately. All of them confirmed that they had evidence against the company and it was only a matter of time before the cases were filed against RIL.
Some of the issues CBI is investigating in its initial inquiry are:
a) DGH being lenient in imposing penalty on RIL for not sticking to work commitments.
b) DGH forcing state-owned firms into forming an alliance with RIL for rig sharing in a way that largely benefited RIL.
c) DGH and petroleum ministry officials allowed RIL to raise capital expenditure in the KG D6 block.
Although the CAG did not specifically mention the escalation of prices by RIL, it did mention it briefly in its report.
Former petroleum minister Murli Deora said he was unaware of the issue, the paper reported.
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Manmohan Tandan
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Reliance Said to Plan Acquiring Canadian Shale Assets After U.S. Purchase
Reliance Industries Ltd. (RIL) is studying shale-gas assets in Canada after agreeing to spend $3.4 billion to acquire and develop reserves in Pennsylvania and Texas last year, a person with direct knowledge of the plan said.
The Mumbai-based energy explorer and refiner controlled by Indian billionaire Mukesh Ambani may also use part of its $16 billion cash reserves to invest in clean energy ventures, the person said, asking not to be identified because the plans are private. The person declined to elaborate.
Encana Corp. (ECA) and Cenovus Energy Inc. (CVE) are among Canadian companies seeking partners to help develop their gas and oil resources. Adding reserves of natural gas trapped in shale rock may help Reliance, India’s biggest company by market value, offset a drop in output of the fuel at home that has led to a 27 percent slump in its shares this year.
“How they transform themselves into a global oil and gas producer will determine their growth,” said Alok Deshpande, an analyst at Elara Securities Ltd. in Mumbai, who has a “reduce” rating on Reliance shares. “Money won’t be a problem.”
Tushar Pania, a spokesman for Reliance, declined to comment on acquisitions or the use of the company’s cash, when reached by telephone today.
Reliance declined 0.9 percent to 779 rupees at 1:31 p.m. in Mumbai trading, heading for its lowest close since Aug. 29. The benchmark Sensitive Index dropped 0.8 percent.
Reliance was India’s most acquisitive company by number of deals last year, according to data compiled by Bloomberg. The company paid $946 million to acquire shale-gas assets in the U.S. from three companies and to spend $2.5 billion on the fields on behalf of its partners.
Expanding Deals Team
The company plans to expand its mergers and acquisitions team after hiring Navin Wadhwani from Rothschild to head the group, the person said. Reliance also plans to hire Tony Fountain, who quit as chief executive officer of the U.K. Nuclear Decommissioning Authority this month, to head its refining and marketing division, the person said.
Fountain was BP Plc’s vice president of marketing and refining before he moved to the nuclear authority and was U.K.’s highest paid civil servant last year, earning 680,000 pounds ($1 million), the London-based Times reported Sept. 21
Encana, Canada’s biggest natural-gas producer, said July 21 it’s looking for partners to help it develop reserves in British Columbia and Alberta. In June, PetroChina Co. walked away from a C$5.4 billion ($5.3 billion) purchase of a 50-percent stake in Encana’s Cutbank Ridge assets.
Cenovus, Canada’s fifth-largest energy company, is discussing partnership opportunities with companies from Asia, the U.S. and Canada for a deal worth “billions” of dollars, Chief Executive Officer Brian Ferguson said April 27.
To contact the reporter on this story: Rakteem Katakey in New Delhi atrkat...@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at apra...@bloomberg.net
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Reliance Said to Need Up to Four Years to Increase Output at Largest Field
Mukesh D. Ambani, chairman of Reliance Industries Ltd. Photographer: Pankaj Nangia/Bloomberg
Profit at Reliance has missed analysts’ forecasts for six of the last seven quarters and its shares have slumped 26 percent this year as production of the clean-burning fuel falls. Photographer: Adeel Halim/Bloomberg
Billionaire Mukesh Ambani’s Reliance Industries Ltd. (RIL) and BP Plc (BP/) may need as long as four years to raise output from India’s biggest gas field because the reservoir is harder to tap than previously estimated, a person with direct knowledge of the matter said.
Reliance, which sold a 30 percent stake in the fields to BP, has sought permission from the Indian government to develop smaller areas to counter a drop from its main KG-D6 block off India’s east coast, the person said, asking not to be identified because the plan is private.
Profit at Reliance has missed analysts’ forecasts for six of the last seven quarters and its shares have slumped 26 percent this year as production of the clean-burning fuel falls. Tests showed increasing production may even be unviable at government controlled prices, the person said.
“The gas business is the most important for their growth and investors are hoping it’ll rise quickly,” said Walter Rossini, who oversees the equivalent of $269 million of Indian stocks, including Reliance, at Aletti Gestielle SGR SpA in Milan. “Without the growth in gas their shares will stagnate.”
Tushar Pania, a spokesman for Reliance, declined to comment on the gas production when reached on his mobile phone yesterday.
Shares of India’s biggest company by value fell as much as 2.8 percent to 764.10 rupees, following yesterday’s 6.1 percent drop, the biggest decline in more than two years. The benchmark Sensitive Index lost 0.5 percent.
Default Swaps
The cost of protecting Reliance’s debt using credit-default swaps has risen 132 basis points to 324 basis points this quarter, the most since the three months ended Dec. 31, 2008, according to CMA, which is owned by CME Group Inc. (CME) and compiles prices quoted by dealers in privately negotiated markets.
London-based BP, Europe’s second-biggest oil company, is studying data for the deepwater block in the Bay of Bengal after receiving the Indian government’s approval to buy the stake in 23 fields valued at $7.2 billion, according to an e-mail response from BP yesterday.
“We need to understand the options through joint evaluation of data before deciding the next course of action,” BP said in the e-mail. Reliance and BP are planning to develop discoveries known as the R-Series and other satellite fields in the KG-D6 block, according to BP.
Boosting output may take a couple of years, Sashi Mukundan, BP’s India chief said Sept. 6.
Satellite Fields
Satellite fields in the KG-D6 block and the R-Series fields together have the potential to produce as much as 35 million cubic meters a day of gas, the person said. That would boost production by 78 percent from the current level of 45 million cubic meters a day.
Tests carried out by Reliance have shown that the gas- bearing layers of sand in two main producing areas of the KG-D6 block are thinner than initially estimated and may require the company and partner BP to adopt costlier drilling techniques, the person said. To recover the additional cost the government may need to increase the price at which the fuel can be sold, according to the person.
Reliance sells gas to power plants and fertilizer units at $4.2 per million British thermal units, a price set by the government and scheduled for revision in April 2014.
Expenditure
Reliance has spent about $5.6 billion on developing the KG-D6 block, or 64 percent of the expenditure approved by the government, the person said. The company has told the Directorate General of Hydrocarbons that it wants to spend the remaining $3.2 billion to develop the R-Series and other satellite fields in the KG-D6 block, according to the person.
The Indian government asked Reliance to drill 11 wells in the year ending March 31, S.K. Srivastava, director general at the country’s oil regulator, said May 2. Srivastava didn’t answer two calls to his mobile phone today.
The decline in output may continue until work on the wells is completed and they are connected to the main pipeline system carrying the gas, according to a Aug. 25 statement from Calgary- based Niko Resources Ltd. (NKO), which has a 10 percent stake in the KG-D6 block.
The investment by BP will accelerate development and production from Reliance’s fields in India, Ambani said on Feb. 21 when the deal was announced. Reliance may get an additional $1.8 billion from London-based BP if the two companies discover more oil or gas in some of the blocks covered by the agreement.
To contact the reporter on this story: Rakteem Katakey in Mumbai at rkat...@bloomberg.net
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Reliance Holders Press Ambani, BP’s Dudley to Seek Higher India Gas Price
Reliance Industries Ltd. (RIL) investors want Chairman Mukesh Ambani and BP Plc (BP/) Chief Executive Officer Robert Dudley to press Indian ministers to increase the price of natural gas from the nation’s largest field.
Billionaire Ambani and Dudley are due to meet Oil Minister S. Jaipal Reddy and Commerce Minister Anand Sharma in New Delhi today, according to the ministries, after BP completed its $7.2 billion acquisition of a 30 percent stake in 21 fields operated by Reliance. They may meet Finance Minister Pranab Mukherjee and Dudley will likely call on Prime Minister Manmohan Singh, the Economic Times reported, citing people it didn’t identify.
Reliance and BP want to develop smaller areas adjoining the main KG-D6 block while they chalk out a plan to reverse a slump in gas production from the reservoir. Drilling plans haven’t been approved by Indian regulators and tests show increasing output from existing fields may be unviable at current prices, a person with direct knowledge of the matter said last week.
“Reliance really needs to start raising the gas pricing issue,” said Taina Erajuuri, a money manager in Helsinki at FIM Asset Management Ltd., overseeing about 1 billion euros ($1.4 billion) of emerging-market assets, including Reliance shares. “This needs to be addressed with the government as well as speeding up the approvals, which are taking a very long time.”
Manoj Warrier, a spokesman for Reliance in Mumbai, declined to comment on the meetings. An e-mail to BP’s India office wasn’t answered.
Slow Decisions
Profit at Reliance has missed analysts’ forecasts for six of the last seven quarters and its shares have slumped 25 percent this year as production of the cleaner-burning fuel falls. Decisions by India’s cabinet have slowed after a minister, bureaucrats and company officials were jailed over corruption charges related to cellular phone licenses.
Reliance is allowed to sell gas from the field off India’s east coast at less than half the price in the U.K. The government set the price of the fuel from the KG-D6 area at $4.2 per million British thermal units in 2007 and is scheduled to revise it in April 2014. The Mumbai-based company sought a rate of $4.5 per million Btu at the time.
U.K. gas prices for October rose 1.2 percent to 58.2 pence a therm in London yesterday, or about $9.10 a million Btu.
Prices need to be increased to allow Reliance to cover the cost of drilling and building pipelines in deepwater areas, said Chokkalingam G., chief investment officer at Mumbai-based Centrum Wealth Management Ltd., which owns Reliance shares.
Free Pricing
“Free pricing of commodities, including gas, is essential and the government needs to slowly move toward that process,” Chokkalingam said by telephone yesterday. “That will attract more global companies to invest in India, increase production and achieve demand to meet the economic growth targets.”
Tests by Reliance have shown that gas-bearing layers of sand in the two main producing areas of the block are thinner than initially estimated and extraction may require costlier drilling techniques, the person familiar with the company’s plans said last week.
Satellite fields in the KG-D6 block and discoveries known as the R-Series together have the potential to produce as much as 35 million cubic meters a day of gas, the person said. That would boost production by 78 percent from the current level of 45 million cubic meters a day. The block produced 60 million cubic meters in June 2010.
India imports about 80 percent of its energy requirement. Companies including Petronet LNG Ltd. (PLNG) and GAIL India Ltd. (GAIL) import more expensive liquefied natural gas to meet the shortfall. Use of LNG climbed 1.1 percent to 749,400 tons in August.
Market Access
BP is seeking to get access to the “fast-growing Indian gas markets,” Dudley said Feb. 21, when the deal with Reliance was announced. The investment by BP will accelerate development and production from Reliance’s fields in India, Ambani said the same day.
Reliance may get an additional $1.8 billion from London- based BP if the two companies discover more oil or gas in some of the blocks covered by the agreement.
“BP is working in India now for things that will be developed in 20 years,” said Christine Tiscareno, an equity analyst at Standard & Poor’s in London. “India is important for BP. Gas consumption is growing very fast, maybe faster than China’s.”
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkat...@bloomberg.net
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RAJESH DESAI
Govt still doesn't see RIL & BP as partners: Sources
The much-hyped partnership between global oil major British Petroleum (BP) and India's largest private company Reliance Industries (RIL) has not yet gotten the stamp of approval from the Government of India, reports CNBC-TV18 quoting sources.
Fresh after getting approval for investing USD 7.2 billion in Reliance Industries' oil and gas properties, BP Plc on Wednesday pressed for an early government nod to develop satellite fields in the KG D6 block and reverse sagging natural gas output from the prolific acreage.
However, sources tell CNBC-TV18 that the government wants BP to first become a signatory to the production sharing contract (PSC). "RIL cannot yet share data on KG-D6 and other blocks," the source said adding, "…nod for BP to sign PSC taking time despite CCEA nod on July 7."
Reliance has attributed the fall in output to a drop in reservoir pressure and water ingress, but upstream oil regulator DGH said the company has not drilled an adequate number of wells. Sources say RIL needs BP to quickly come on board to ramp up D6 production.
However, rating agency Moody's said RIL's rating not to be impacted by gas output decline.
Meanwhile, Bob Dudley, the Chief Executive of Europe's second biggest oil company, arrived in India yesterday evening on a two day visit during which he will meet the virtual who’s-who of the government — from Prime Minister, Manmohan Singh to Finance Minister, Pranab Mukherjee and Oil Minister, S Jaipal Reddy.
Speaking to the press today, Dudley said, he expects KG-D6 gas output to rise from 2014. "I believe it will take to 2014 to get these kinds of structures developed and tied back into infrastructure. We can see the resources out there and I believe by 2014, we will be back up," he said adding, "We will apply for government approval on D-6 development plan this year."
Commenting on the gas pricing issue, Dudley said, "In general deep-water requires a lot of capital. It's a lot of risk; you never know exactly what is down there miles below the subsea and so you obviously need to develop mechanisms that create the rewards for all that risk that are in place. And overtime, free market system is what any economy needs to be able to ensure efficient development of these resources."
Though the initial focus will be on India, chairman Mukesh Ambani doesn't see BP-RIL partnership just limited to Indian shores. "We will look at appropriate opportunities between where our true synergies come together all over the world," he believed.
Sagar Salvi
sagar...@network18online.com
EQUITY BULL
RAJESH DESAI
Several state governments and local administrations have evinced keen interest in the technology to secure metropolises and cities in the wake of rising terror threats, sources said.
Besides presentations to various state and local administrations, the RIL has submitted an Expression of Interest to provide an electronic security system through fourth generation (4G) wireless networking in Mumbai, they said.
Reliance Industries Limited (RIL) has ventured into the new area of providing surveillance and security in cities by joining hands with Siemens to offer intelligent electronic solutions to face growing terror threats. Reuters
The role of surveillance and security has assumed greater significance with insurgency and terrorism becoming a global phenomenon, they said, adding that traditional security platforms are not able to cope with the new challenges.
“So there is an emerging need to move over to 4G wireless networking,” they said.
With contiguous, pan-India Broadband Wireless Access spectrum, Reliance plans to offer 4G wireless networking services for safety, security and other advanced applications, the sources said.
They said Reliance and Siemens would “combine to leverage the 4G network for the low latency and assured Quality of Service (QoS) required for video and security applications.”
RIL’s new aerospace and security venture, led by its President and CEO Vivek Lall, was also in advanced discussions with global giants in the Unmanned Aerial Vehicle space.
RIL has designed and operates one of the largest integrated security automation systems in the world, consisting of over 12,000 cameras and thousands of other advanced security sensors, radars, and video analytics among others, the sources said.
It has also implemented advanced command and control centres for security of its own critical infrastructure for over a decade, they said, without elaborating any further.
Reliance has vast domain experience with hundreds of security and safety professionals having background in defence, paramilitary and police, as well as its own internally trained resources, they said.
Lall, an engineer of repute himself, was recently at the Paris Air Show where the discussions were launched. He is also making efforts to bring state-of-the-art technologies to India and create innovation capability in aerospace and security.
Latest technologies like the 4G broadband wireless enable the mobility of sensors and command and control points by giving updated Concept of Operations (Conops) in real time to all who matter in a secure manner, Lall had said recently at a FICCI homeland security conference here.
He had said that one of the most important aspects of fighting the
homeland security battle was to undertake smart analysis of data and
information from large data sets and diverse variety of sensors to gain
knowledge.
PTI
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RAJESH DESAI
Reliance Retail opens first hypermarket in Mumbai
Sep 30, 2011
The outlet will offer products a wide range of category ranging from fashion clothing, consumer electronics, home ideas, leisure, beauty and style, fresh fruits and vegetables, dairy, grocery, telecom, gift items, entertainment, to health and wellness products. Apparels, footwear, eyewear, cosmetics and fragrances, and fashion jewelry will also be available in the store.
RelianceMart provides its customers with "RelianceOne," a membership loyalty program, designed to deliver customized benefits to frequent shoppers. Under this scheme, customers can earn RelianceOne Points on all shopping in the store which can be redeemed after accumulation. The scheme already has a membership base of more than 6 mn customers.
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Reliance Retail in talks with Berkshire unit for India JV - report
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RAJESH DESAI
Reliance Industries Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on October 15, 2011, inter alia, to consider and approve the unaudited financial results of the Company for the quarter / half year ended September 30, 2011 (Q2).
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Reliance Industries , India's largest listed firm, is set to sign a deal with the Indian unit of Walt Disney, to acquire content for its telecom operations.
The deal by Reliance with UTV Software , in which Disney controls 50.44%, is expected to be completed in the coming weeks, the newspaper said late on Sunday, citing people close to the development.
UTV Software said it had no immediately comment on the report, while Reliance could not be immediately reached.
Reliance, which has diversified into telecom, retail, financial services and hospitality sectors in recent years from its core business of refining and oil and gas exploration, last year acquired Infotel, which emerged as the only firm to secure nationwide wireless broadband radio airwaves in an auction.
The deal is expected to give Reliance access to games, entertainment and children's content for their telecom operations, the paper said.
Reliance has plans of building a data-focused business which will provide mobile, smartphone, tablet and computer users access to the net and online related services via a wireless broadband network.
The diversified company, which has been under pressure from falling gas output, has pushed for tie-ups in recent months to boost its business.
In June, Reliance signed a joint venture with DE Shaw, a US hedge fund, for acquiring Bharti Enterprises 74% stake in an insurance joint venture with France's Axa.
The following month the Indian cabinet approved Reliance's plan to sell a stake in 21 of 23 planned oil and gas blocks to BP as part of a USD 7.2 billion deal.
At 10:24 a.m. (0454 GMT), shares in Reliance, valued at USD 53.5 billion, were up 1.5% at Rs 815 in a firm Mumbai market.
The stock has been a laggard, falling 24% in the year to date compared with a 21% drop in the main index, largely due to falling gas output.
CA. Rajesh Desai
RAJESH DESAI
Options protecting against losses in Reliance Industries Ltd. (RIL) shares fell to the lowest in two years before India’s most valuable company reports earnings tomorrow.
Implied volatility, the key gauge of options prices, for one-month options is 7.37 points below historical volatility for the past month, near the lowest on a relative basis since November 2009, according to data compiled by Bloomberg. The spread reached a two-year low of 12.16 points on Sept. 20, the data show.
Earnings for Mumbai-based Reliance have missed analysts’ forecasts for two of the last three quarters. Its shares have slumped 20 percent this year, more than the 18 percent decline in the benchmark BSE India Sensitive Index, as the company struggled to reverse a drop in natural-gas output from India’s biggest gas field.
“Markets are hinting that the worst may be over for the stock,” Gaurav Mehta, derivatives strategist at Ambit Capital Pvt., said in a phone interview yesterday. “Lower risk of an earnings surprise is leading to a drop in implied volatility.”
Reliance will report tomorrow a net income of 57.2 billion rupees ($1.2 billion) for the three months ended Sept. 30, up from 49.2 billion a year ago, according to the median estimate of 20 analysts surveyed by Bloomberg. That would be the most since the three months ended Dec. 31, 2007.
The stock’s 30-day implied volatility has declined 17 percent to 36.56 yesterday from this year’s peak of 44.36 on Oct. 4, Bloomberg data show. The historical volatility has fallen to 43.93 from this year’s peak of 49.50 in September.
India VIX
The shares gained 0.5 percent to 851 rupees at 9:58 a.m. in Mumbai. They have risen 5.9 percent this week, the most since the week ended Sept. 4.
The India VIX, which gauges the cost of buying protection against losses in the S&P CNX Nifty Index, fell 1.4 percent to 27.85. The gauge has dropped 25 percent from a two-year high of 37.19 on Oct. 4.
Reliance and BP Plc, which owns 30 percent of the KG-D6 gas field, may need up to four years to increase output as the block is harder to tap than previously estimated, a person with direct knowledge of the matter said Sept. 22. Reliance, controlled by billionaire Mukesh Ambani, has sought Indian government’s permission to develop smaller areas to counter a drop from the reservoir, the person said.
Satellite fields in the KG-D6 block and the R-Series fields together have the potential to produce as much as 35 million cubic meters a day of gas, the person said. That would boost output by 78 percent from the current level of 45 million cubic meters a day.
To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakr...@bloomberg.net
To contact the editor responsible for this story: Shiyin Chen at sch...@bloomberg.net
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CA. Rajesh Desai
RAJESH DESAI
| RIL Q2 FY12 ESTIMATES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
By SP Tulsian Reliance Industries Ltd. (RIL) will declare its Q2FY12 (quarter ended 30th September 2011) results on 15th October, 2011. Our estimates are as under:
(Amount in Rupees crore)
*Figures in brackets indicates % margin for Q2FY12
· BP PAT share will be at around Rs. 205 crores for one month, in 21 oil blocks of KG Basin.
Notes:
1. GRM for September 2011 quarter is estimated at $10.60 per barrel.
2. Advance Tax paid by the company –
3. Debt of the company will be at Rs. 67,000 crores on standalone basis and at Rs. 84,000 crores on consolidated basis.
4. Cash with the company will be at around Rs. 77,000 crores on 30-09-11. This includes:-
5. BP Deal has been concluded on 30-08-11, when rupee was ruling at Rs. 46/ US $. Also, BP will be entitled for profit in 21 oil blocks of KG Basin, for one month in this quarter. This will be about Rs. 205 crores.
6. Oil & Gas production is estimated as under: -
i) KG – D6
a) 130 BCF of natural gas at an average of 48 mmscmd. Presently D1 and D3 are producing 38 mmscmd and MA field about 7 mmscmd.
b) 1.25 million barrels of crude oil.
ii) Panna Mukta
17 BCF of gas and 2.5 million barrels of crude oil.
iii) Tapti
18 BCF of natural gas and 2.50 lakh barrels of crude oil.
7. Fall in average annual gas production by 10 mmscmd, result in lower PAT of about Rs. 1,000 crores.
8. Exceptional gain on BP deal vis-à-vis depreciation charge on oil & gas assets thereof, has not been considered. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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CA. Rajesh Desai
RAJESH DESAI
Reliance Industries (RIL), which will post its July-Sept results on Saturday is likely to benefit from a weak rupee and a stronger refinery margin, say analysts. However, with falling gas output from its KG-D6 oil fields and margin pressure in the petrochemicals business, the energy giant will be hardly able to maintain its performance year-on-year (YoY).
Going by atleast four brokerages estimates, the country's largest private sector company by market capitalisation will post a 15-18% increase in its net profit and its revenues are also expected to go upto by around 38-40%.
Ajay Parmar, head of institutional research, Emkay Global Financial Services told moneycontrol.com, "A decline in the value of the rupee against the dollar is definitely a positive trigger for RIL, as 60% of revenues are from exports.” Gross refining margins (GRM) and petchem realisation are benchmarked to dollar.
Parmar further says that GRM is expected to be around USD 11/bbl versus $7.9 bbl YoY. "But there could be pressures from lower petchem margins and lower gas production from the KG-D6 oil wells at around 45 million metric standard cubic meter per day (mmscmd) compared to 48.9 mmscmd YoY.
Motilal Oswal has also predicted the oil and gas major's net profit for the quarter under preview to go up 17.8% at Rs 5799.2 crore YoY and its revenues will grow 40.5% at Rs 80,779 crore largely benefitting from the declining rupee which has slipped around 16% against the greenback quarter-on-quarter.
Analysts say that important developments that could significantly impact the numbers include the consummation of the RIL-BP deal. Although the government approved it in the last quarter, these estimates do not include its impact.
With analysts coming out with positive reports on RIL's Q2 performance, its shares gained 0.73% to Rs 853 at 10:38 a.m on the Bombay Stock Exchange. They have risen 6% this week, the most since the week ended Sept 4.
CA. Rajesh Desai
RAJESH DESAI
Shardul Kulkarni, Angel Broking share his view on Reliance Industries .
Kulkarni told CNBC-TV18, "Reliance Industries - before its results it's moving upwards; Rs 860 to 865 that is the zone I think that traders should watch out for. Even investors should watch out for those who have sold higher levels. The stock actually manages to cross Rs 870-860 bar and close above that level on a weekly basis. I think you have a very strong reversal head and shoulder pattern, inverted head and shoulder patter that will get activated."
He further added, "Overall the market opinion will also change if that particular thing happens because Reliance has a major weightage on the index. So I think it would play a game changer role in the next 3-4 weeks. If it goes above Rs 870 I think you could see a rally on the cards. If it does not go above Rs 860-870 band I think you could see a further fall in the stock price. I would expect Rs 800-810 levels to be tested and Rs 860 to be a significant resistance."
CA. Rajesh Desai
RAJESH DESAI
Shardul Kulkarni, Angel Broking share his view on Reliance Industries .
Kulkarni told CNBC-TV18, "Reliance Industries - before its results it's moving upwards; Rs 860 to 865 that is the zone I think that traders should watch out for. Even investors should watch out for those who have sold higher levels. The stock actually manages to cross Rs 870-860 bar and close above that level on a weekly basis. I think you have a very strong reversal head and shoulder pattern, inverted head and shoulder patter that will get activated."
He further added, "Overall the market opinion will also change if that particular thing happens because Reliance has a major weightage on the index. So I think it would play a game changer role in the next 3-4 weeks. If it goes above Rs 870 I think you could see a rally on the cards. If it does not go above Rs 860-870 band I think you could see a further fall in the stock price. I would expect Rs 800-810 levels to be tested and Rs 860 to be a significant resistance."
CA. Rajesh Desai
RAJESH DESAI
| Expert Opinions..links to reports |
||
|---|---|---|
| Ernst & Young | Certain aspects of RIL's operation of KG-DWN-98/3 under the Production Sharing Contract with the Government of India | |
| Independent Project Analysis, Incorporated | 1. | Assessment of Field Development Plan Revision for E&P Industry and for the D1 & D3 Gas Field Project |
| 2. | Assessment of the Comprehensiveness of the KGD6 Projects Field Development Plans | |
| 3. | An Evaluation of the KGD6 Development Projects | |
| Daniel Johnston & Co.Inc. | 1. | Lack of Appraisal Programme |
| 2. | Cost Overruns | |
| 3. | Irregular Retention of Entire Contract Area as Discovery Area | |
CA. Rajesh Desai
RAJESH DESAI
CA. Rajesh Desai
RAJESH DESAI
CA. Rajesh Desai
RAJESH DESAI
Billionaire Mukesh Ambani’s Reliance Industries Ltd. (RIL) is poised to use its record cash for overseas acquisitions to take advantage of the cheapest valuations of oil and natural gas companies in three years as profit growth slows.
“Reliance has a strong balance sheet and sustained earning base to pursue growth opportunities,” Chairman Ambani, 54, said Oct. 15 after the Indian refiner and explorer reported that a 16 percent rise in second-quarter profit and sale of assets to BP Plc (BP/) helped boost cash to 614.9 billion rupees ($12.6 billion).
Reliance, PetroChina Co. and Cnooc Ltd. are among Asian companies likely to spend $150 billion over the next five years on assets to secure energy supplies for the region’s growing economies, according to Sanford C. Bernstein Co. Ambani has bought shale gas assets in the U.S. and is targeting acreages in Canada after a drop in gas output in India led to an 19 percent decline in his company’s shares in Mumbai trading this year.
“A large energy acquisition may be just what they need to kick-start things,” said Kamlesh Kotak, vice president of research at Asian Markets Securities Pvt. in Mumbai. “That will be the best possible use of their cash, which has become pretty huge now.”
Reliance shares fell 1.5 percent to 854.25 rupees at 9:18 a.m. in Mumbai trading, while the benchmark Sensitive Index gained 0.3 percent.
Reliance holds the third-largest cash and short-term investments among energy companies in Asia Pacific, according to data compiled by Bloomberg. PetroChina and Cnooc have the most. The Indian company received $7.2 billion from the sale of a 30 percent stake in 21 oil and gas fields to BP and is working with the London-based explorer to help reverse the drop in output atIndia’s biggest gas deposit.
BP Alliance
Output at the KG-D6 field may start rising by 2014, Robert Dudley, BP’s chief executive officer, said Sept. 28. Reliance and BP have sought permission from the Indian government to develop smaller fields to make up for declining output at KG-D6’s two main producing areas.
“The future depends very much on what the BP-Reliance joint venture can do to turn around their upstream business and what Reliance will do with their cash,” Neil Beveridge and Ying Lou, Hong Kong-based analysts at Bernstein, said in a report today. “We expect Reliance to use its strong cash position to fund M&A, potentially buying overseas upstream assets.”
Bernstein and Goldman Sachs Group Inc. have predicted a surge of oil and gas takeovers after global energy shares fell 21 percent in the third quarter, the worst three months since 2008. Crude in New York has declined 4.8 percent this year amid concern that Europe’s debt crisis and a U.S. economic slowdown will drag the world back into recession.
Debt, Earnings
Reliance’s debt stood at 714 billion rupees as of Sept. 30. The explorer plans to have more cash than debt by March 31 as it seeks to expand into new business areas, Ambani said June 3.
Net income in the three months ended Sept. 30 was 57.03 billion rupees, Reliance said Oct. 15. That matched the median estimate of 22 analysts surveyed by Bloomberg and was little changed from the preceding quarter.
Sales rose 37 percent to 785.7 billion rupees from a year earlier, and were less than the record 810.20 billion rupees in the three months ended June 30. Gains processing each barrel of crude oil into fuels followed a similar pattern, rising to $10.1 in the quarter from $7.9 in the same period a year earlier, and easing from $10.3 a barrel in April-June quarter.
Refining Margins
Refining margins may fall next year as global capacity additions, including 730,000 barrels a day in China, exceed demand growth, according to an Oct. 5 note by Bank of America Corp. analyst Sabine Schels.
Pretax profit from refining increased 40 percent to 30.8 billion rupees from a year earlier. Other income, including interest earned on cash deposits, climbed 64 percent to 1.1 billion rupees. The Reserve Bank of India has increased interest rates 12 times since March 2010 to curb inflation, helping companies earn more money on their cash.
“Reliance is making more money out of money and less out of oil,” said Jagannadham Thunuguntla, chief strategist at SMC Wealth Management Services Ltd. in New Delhi. “That shows operations are stagnating,” he said. “With BP on board, they have an opportunity to work with them on overseas projects.”
To contact the reporter on this story: Rakteem Katakey in New Delhi atrkat...@bloomberg.net
Financial Presentation by co. of 2011-12 Q2 Results - 15th Oct 2011 is attached.
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(Reuters) - Five years after making a grand foray into retail, Mukesh Ambani's Reliance Industries is nowhere close to the scale he had hoped his company, India's largest listed group, would achieve in a fragmented and fast-growing industry.
With retail giants Wal-Mart Stores Inc and Carrefour circling India in anticipation of a rule change that would allow foreign investment in supermarkets, Asia's richest man is scrambling to capitalise on his early mover advantage.
Over the past few months, Reliance has accelerated store openings, brought in a management team from Wal-Mart China and launched wholesale operations that serve the small mom-and-pop players dominating the $450 billion Indian retail sector.
It has also rolled out its first large-format hypermarket outlets selling everything from food to furniture.
"In retail they are still a long way off," said Michiel van Voorst, portfolio manager for Asia-Pacific equities at Robeco Hong Kong, which is considering buying into the stock it sold off three years ago, tempted by its 22 percent decline in 2011.
"The business will still require a lot of investments, and there is no synergy to any of other activities of the company," said van Voorst, whose firm manages $2 billion in Asia.
For graphic on retail market, click, link.reuters.com/byz54s
Reliance battles the same problems that have thwarted faster growth for organised retail in Asia's third-largest economy, including expensive real estate and opposition from politically powerful small shop-owners, farmers and middlemen.
At the launch of the retail arm in 2006, the energy-focused conglomerate set out to build a $20 billion-revenue business by 2011.
For fiscal 2011 ended March 31, however, retail sales were just 56.77 billion rupees ($1.1 billion), according to two analysts' estimates, an increase of 27 percent, but a tiny share of the group's total haul of $53 billion.
Net loss in the business is estimated to have doubled to 4.46 billion rupees. The company acknowledges its retail business is loss-making but declined to verify those figures.
TOUGH MARKET
Reliance is the country's second-largest retailer by sales behind Future Group's Pantaloon Retail, but its overall market share is small in a country where more than 90 percent of the industry is made up of mom-and-pop stores.
After launching operations in November 2006, it grew to about 1,000 stores within three years, but soon found it did not have the systems and infrastructure to support that expansion.
Staff attrition, poor locations, supply-chain issues and infrastructure problems prompted it to shut nearly 50 stores within two years of the launch. Since then, the company has standardised its operations and increased centralisation of its supply chain.
"During the 2008 slowdown, we thought we were insulated but we have learnt a lot from what we did ," Bijou Kurien, chief executive of Reliance Retail's lifestyle arm, told Reuters.
Reliance's supermarket push hit major hurdles in 2007 and 2008, when it was chased out of the states of West Bengal, Jharkhand and Uttar Pradesh, India's most populous region, after protests by small-shop owners and farmers.
Reliance still does not have supermarkets in Uttar Pradesh, which was supposed to generate 15 percent of its retail revenue by 2011. It also lacks a major store presence in eastern India.
The standalone "kirana" shops, or neighbourhood mom-and-pop stores, and street-side vendors where most Indians buy groceries are popular because they are convenient and give credit.
They also operate with little overheads, forcing chains to compete on razor-thin margins.
Still, some of Reliance's local rivals including Pantaloons and Shopper's Stop have managed to make a profit, helped by a compact network of stores.
"The idea is to expand and make money in every store that we set up, and that would be the way in which we scale the business," Kurien said.
NEW FACES, BIG BOXES
To jumpstart its retail business, Reliance recently brought in Wal-Mart China's former chief operating officer Rob Cissell to head its supermarkets, along with his ex-colleague Shawn Gray, making up the retailer's third management team since 2006.
Its original management was replaced in 2009 with a team of expatriates led by Gwyn Sundhagul from Tesco Lotus in Thailand. He now works in another Reliance business.
"We are now going into a phase of execution," a senior executive at Reliance Retail said on condition of anonymity as he is not authorised to speak to the media.
"Our hypermarket initiative is now being driven by someone who has done this earlier in China, which is a similar market."
The changes at the top coincide with an expansion push that saw it open 60 stores in the last quarter, including its first two hypermarkets, which opened last month. That brought its overall store count to about 1,050.
The large-format stores are between 60,000 and 100,000 square feet and by next year will be supported by distribution centres in Delhi, Bangalore and Pune.
"The quality and efficiencies are much higher. The margin mix improves considerably. Small stores bring you visibility, but you need the big boxes for balance," the executive said.
Reliance also last month opened its first cash-and-carry, or wholesale, store in Ahmedabad, entering a format which Wal-Mart already tried with six such outlets in India through a joint venture with the parent of telecoms firm Bharti Airtel.
"We have also realised that 'kirana' stores will continue to coexist, so why not supply to them? It is an opportunity and we will not leave any opportunity," the Reliance official said.
Supermarkets account for 65 percent of Reliance's retail business, while specialty shops including local tie-up with global brands like Marks & Spencer, and Diesel make up the rest.
"Their big gap is how to stabilise and run the operations. They have to stick to one plan and move, and that is their biggest challenge," said Pinakiranjan Mishra, head for consumer products and retail at advisory firm Ernst & Young.
"If you change the model every one-and-a-half, two years and if you change the team, everything has to be reset," he said.
FINANCIAL MUSCLE
The advantage Reliance holds over its Indian rivals is its financial muscle.
While local chains, many of them loss-making and cash-constrained, look to hook up with the global players keen to enter India once rules allow, Reliance has the wherewithal and the intention to go it alone.
"The area which is of concern for other retailers is finding capital. That is not so much a challenge for us," said Kurien.
Reliance, which owns the world's biggest oil refinery, boasted $12.6 billion of cash at the end of September.
Reliance also has the advantage of time, as a politically weakened leadership in New Delhi drags its feet on allowing foreign investment into multi-brand retail, which is opposed by sections of the ruling Congress party as well as the main opposition Bharatiya Janata Party.
Wal-Mart and others are expected to take years to build scale in a challenging Indian market.
"There will certainly be competition, possibly price wars," said Anish Sarkar, head of consulting at Capgemini India.
"But the battle for the next few years will not be for market share but for expanding the market itself."
But not everyone is convinced that retail is the best use of Reliance's formidable resources.
"I can understand if they want to invest in organised retail, but they should be investing in that outside of the main company, from separate capital," Robeco's van Voorst said.
"Otherwise there is concern that capital that yielded high returns is now deployed in assets that are not yielding much value," he said.
With growth in its core energy business below expectations over the past year, Reliance has been keen to diversify and has ventured into areas such as telecoms and financial services.
Reliance is hopeful that the new management would exceed the 20 percent same-store sales growth that it is on track for this fiscal year, gradually giving the business higher visibility.
"We have big plans for this business," Kurien said. "We want to be the largest retail company in the country, as no one really remembers who came second."
(Editing by Tony Munroe and Vinu Pilakkott)
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The Dhirubhai-1 and 3 gas fields and the MA oilfield in the KG-DWN-98/3, or KG-D6, block in the Bay of Bengal produced about 41.68 mmscmd of gas in the week ending October 30, according to a production report filed by the operator (Reliance) with the Oil Ministry here.
The current output is a far cry from the 61.5 mmscmd level achieved in March last year and the production plan of over 70 mmscmd for 2011-12.
The Dhirubhai-1 and 3, or D-1 & D-3, fields produced 34.71 mmscmd and the remaining 6.97 mmscmd came from the MA oilfield during the week under review.
Reliance, the report said, has shut four wells due to high water ingress and sanding issues. Current output is from 14 wells out of the 18 wells drilled and completed so far in the D-1 & D-3 fields.
The MA oilfield currently produces an average 13,071 barrels of crude oil per day.
The report said 14.06 mmscmd of the gas output is being sold to fertiliser plants and 24.29 mmscmd to power plants.
The remaining 3.3 mmscmd is consumed by other sectors, including gas transported through the East-West pipeline from the East Coast to consumption centres in the West.
Reliance had projected an output of 41.50 mmscmd of gas in the first week of November.
As per the status report, out of the 22 wells planned in in Phase-I of D-1 and D- field development, 18 wells have been drilled and completed so far. Of these, 14 wells were put on production, while four wells were kept closed due to high water cut and sanding issues.
Minister of State for Petroleum and Natural Gas RP N Singh had in August informed Parliament that output from KG-D6 was short of the 70.39 mmscmd level envisaged by now as per the field development plan approved in 2006.
While Reliance holds 60 per cent interest in KG-D6, UK’s BP Plc holds 30 per cent and Niko Resources of Canada the remaining 10 per cent.
Reliance started natural gas production from the KG-D6 fields in April 1, 2009.
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DGH proposes formula for curbing RIL's KG-D6 cost recovery
Five days after Reliance invoked arbitration against the Indian government, upstream regulator Directorate General of Hydrocarbons (DGH) actually proposed a formula for calculating just how RIL's cost recovery should be restricted at the KG-D6, reports CNBC-TV18.
As per this formula, which restricts cost recovery in proportion, RIL maybe disallowed to recover USD 1.2 billion in FY12 and FY13.
The DGH has also suggested this formula be used ever year to calculate the cost that RIL should be disallowed from recovering.
RIL commenced gas production from the KG D6 field, which had a reserve potential of 11.3 trillion cubic feet, in April 2009 and had promised to ramp up production from the wells to 80 mmscmd ((million standard cubic metres per day) by April 2012. It had proposed a capex of USD 8.5 billion to drill and bring to production a total of 31 wells, which included a major milestone of 60 mmscmd by 2010.
However, it could reach a high of 54 mmscmd in 2010 after which production started tapering and is currently at 34 mmscmd.
Reliance’s export trail in Bahamas may not yield much
The fake exports trail is getting curiouser and curiouser.
On 9 December, Commerce Secretary Rahul Khullar announced a $9.4 billion correction (“mistakes take place”) in the export data for April-October 2011 due to a computer crash and data entry errors. Among other things, he said that engineering exports had been overestimated by $15 billion and petroleum and gems and jewellery exports were understated by $12 billion.
But the finance ministry is not willing to overlook “mistakes” so easily. The Economic Times reported on 12 December that the finance ministry has asked not one, but three of its investigation arms, to check on petroleum product exports to tax haven destinations like the Bahamas and Cyprus. The three agencies are the Central Board of Direct Taxes, the Directorate of Revenue Intelligence and the Enforcement Directorate.
Chairman and Managing Director of Reliance Industries Mukesh Ambani. Reuters
Quoting sources, the newspaper says: “The revenue department has asked the agencies to verify the transactions since it has come to light that in some cases the export figures do not match the inward import figures of the two tax havens.”
Firstpost had reported in October that exports to the Bahamas had shot up 1,000-fold from $2.2 million in 2008-09 to $2.2 billion two years later – the jump being explained later as a surge in exports by Reliance Industries and one public sector company.
The petro-goods export miracle was indirectly confirmed by Khullar’s press conference on Friday while announcing the export figures for November. He said between them petroleum products and gems and jewellery exports were understated by $12 billion.
But if the finance ministry now wants to check if the “miracle” was for real, it is unlikely to discover the truth – for the trail may well have gone cold.
In yet another report on the subject, The Economic Times on Tuesday (13 December) seemed to suggest that the finance ministry’s suspicions may be correct – that the export data from India to the Bahamas may not match the import data at the Bahamas end.
The Bahamas, it seems, were not the final destination for these exports, especially Reliance’s. Rather, it is only a storage depot, from where petro-goods are shipped to markets in North or South America.
This is what the newspaper now says, quoting industry officials: “Since only a small fraction of this shipment is used locally in the Caribbean region, and often the fuel is directly loaded to smaller ships at Bahamas for shipment to the North and South American markets, the export numbers may not match the import data of Bahamas.”
Two things are thus clear.
One, it is Reliance that is behind the big export surge to the Bahamas, a Caribbean tax haven. And two, the Bahamas will not be of any help in telling the taxman whether the exports were for real of not – since the islands were only a transit point.
Pranab Mukherjee can thus call of his sleuths from taking a junket to the Bahamas. But he still needs to probe the larger question of overinvoicing of exports to bring back Indian black money from the tax havens.
As Firstpost reported two months ago, a Kotak Securities report had highlighted the huge discrepancy between official export figures and the figures put out by the companies on the BSE 500 index. Firstpost was the first to highlight the implications of the Kotak report.
The authors of the report — Sanjeev Prasad, Sunita Baldawa and Amit Kumar — concluded that there was enough ground for an investigation: “Our study of exports data of major engineering companies (including automobiles and metals) shows that the increase in their exports does not reconcile with the steep increase in official exports data. In fact, the gap is quite substantial.”
The search, though, must begin here. Not the Bahamas.
--On Tue, Dec 13, 2011 at 1:40 PM, kuku manmohan <manmoh...@gmail.com> wrote:
Shares of Reliance Industries will rise relative to India’s benchmark index in next 30 days, said Morgan Stanley citing compelling short-term valuations.
“At current levels, price-to-earnings is 12 times on trailing earnings and price-to-book is 1.4 (times), discounts of 30 (percent) and 35 (percent) to its historical averages. Even on relative price-to-earnings, the stock is trading at a 20 (percent) discount to the Sensex, so valuation looks attractive,” said the bank in a note.
Morgan Stanley also underpins the fact that the company’s earnings are positively correlated with depreciation of the Indian rupee, which should mitigate recent concerns on refining and petrochemical margins.
Reuters
--On Mon, Dec 12, 2011 at 12:16 PM, karishma suvarna <karishma...@gmail.com> wrote:
Index heavyweight Reliance Industries (RIL) fell 2%, with the stock falling for the third straight day. Reliance Industries is reportedly scouting for oil investments in the US as it looks to increase the stake of crude production. The reports stated that company is also looking to invest more in the United States shale gas sector. Reliance has outlined plans to spend $4 billion to $4.5 billion by 2014 on three US shale gas joint ventures it entered into last year.
As per a separate report, RIL will enter the fast-food business with its own brand next year, opening yet another front to do business directly with India's growing young population after retail and 4G wireless services. According to reports, RIL's chief Mukesh Ambani has roped in Rishi Negi, chief operations officer of multiplex operator Fame India, which is partly owned by his younger brother Anil Ambani, to develop a quick service restaurant (QSR) concept within 3-4 months. RIL is exploring a scaleable model like McDonald's and Domino's, complete with a standardised menu and express delivery. It plans both independent outlets and presence in food courts.
RIL late last month said that it has initiated arbitration proceedings against the government to seek an independent view of a tribunal on the issue of the company's entitlement of recovery of entire costs on KG-D6 gas blocks from the revenue generated from the blocks. RIL said it has initiated arbitration proceedings against the Government of India (GoI) in a bid to finally resolve the cost recovery issue so as not to hinder future investments in this block.
RIL said its investment in KG-D6 production facilities has been only partly recovered and the return on the investment so far is less than the cost of the capital. The production sharing contract (PSC) with the Government of India (GoI) contains no provision which entitles the GoI to restrict the costs recovered by the company by reference to factors such as the level of production or the extent to which field facilities are utilised, RIL said.
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RIL buys stake in US's Terra Power
Reliance Industries said on Thursday it has bought a minority stake in Terra Power, a US-based nuclear-technology design and engineering company, through one of its subsidiaries."This is one of our series of investments in the broader energy sector," a company spokesman told Reuters.
Reliance Industries Chairman Mukesh Ambani will join the company's board, which includes Microsoft Chairman Bill Gates and Silicon Valley venture capitalist Vinod Khosla, the Economic Times had reported earlier in the day.
Reliance, India's most valuable company, controlled by Indian billionaire Mukesh Ambani, has outlined plans to spend USD 4 billion to USD 4.5 billion by 2014 on three US shale gas joint ventures it entered into last year.
Last week, a company official told Reuters that it is scouting for oil investments in the Americas as it looks to increase the stake of crude production it owns to feed its refinery, the world's largest.
Reliance has recovered strongly despite posting a disappointing set of advance tax numbers. The company is reported to have paid Rs 1002 crore as compared to Rs 1190 crore previously.--
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Reliance Industries is in "advanced talks" with American defence giant Raytheon to create a joint venture that will pursue opportunities in homeland security in India and abroad.--
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Gas output from Reliance Industries' eastern offshore KG-D6 gas field declined to a fresh low of 38.66 million cubic metres per day during the week ended 18 December 2011, as the company shut five wells due to water ingress, a news agency reported citing a status report filed by the company with the Oil Ministry. The director general of hydrocarbons S.K. Srivastava last week said that RIL is planning workover operations to revive sick wells at its D6 block in the Krishna-Godavari basin, off India's east coast. Srivastava said production at the KG-D6 block may increase post the workover program.
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report atc.
In an interview to CNBC-TV18, Sudarshan Sukhani, s2analytics.comQ: What did you make of the pullback in Reliance ? Has that changed anything technically for the big stock for you?
A: No it hasn’t. In Reliance, the pullback has come accompanied by a bit of drama yesterday. Some gains in the Nifty means nothing. Sometimes a message is slightly different and that is that Reliance has touched the Rs 690 target - that was the first target we had given. We are looking at Rs 600-630 now. So after a target is achieved, it’s quite possible to see relief rallies, a sense that maybe the worst is over. All that is possible in Reliance but I don’t think the lows have been made yet.
On Sat, Jan 7, 2012 at 9:47 AM, kuku manmohan <manmoh...@gmail.com> wrote:
Reliance Industries to shut CDU, gasoline units in February
SINGAPORE: Reliance Industries will shut several units at its newer 580,000 barrels-per-day Jamnagar refining complex for a three-week maintenance in February, traders said on Friday.
The shutdown will reduce its appetite for crude and also cut back gasoline output, tightening supply of the motor fuel in Asia.
"Gasoline supplies are going to be tight," said a trader. "Not only will there be less coming out of India, but Taiwan has also cut back but demand from the Middle East has been firm recently."
Reliance will shut a 290,000 bpd crude distillation unit (CDU) or half of the crude processing capacity at the Jamnagar complex, traders said.
Other units such as a 70,000 bpd coker, a catalytic reformer (CCR) and a residue fluidised catalytic cracker (RFCC) or gasoline-making unit may also be idled during the February turnaround, traders said. A CCR converts naphtha into reformates used in gasoline blending.
The company's spokesman Tushar Pania confirmed the maintenance, but declined to specify which units will be shut.
Based on Reuters' 2008 data, Reliance has a 110,000 bpd CCR and a 200,000 bpd RFCC at the newer complex, which analysts had said could produce 8 million-10 million tonnes of gasoline a year.
Taiwan's CPC will also be shutting a 50,000 bpd RFCC in February for a two-month maintenance, while Formosa will only restart a 84,000 bpd RFCC in the later half of January.
Reliance, owner of the world's biggest refining complex, also operates an older, 660,000 bpd refinery at Jamnagar.
Traders said it plans to shut another 300,000 bpd CDU for maintenance this year but the schedule was not immediately clear.--
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Reliance Industries is in talks with India's major airlines to provide jet fuel infrastructure and transport services. The company is negotiating with airlines including Kingfisher Airlines, Jet Airways and Air India to provide storage facilities at ports, transport services to airports and fuelling infrastructure around the aircraft, say reports.
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The company has indicated pricing of 365 basis points over US treasuries for the bonds, which will be issued by Reliance Holding USA, they said.
Proceeds will also be used to refinance short-term debt incurred in the shale gas business, the sources said.
The deal is being led by Barclays Capital, Bank of America Merrill Lynch, Citigroup, HSBC and UBS, they said.
Standard & Poor's has assigned a BBB long-term rating to the senior unsecured notes, which will be guaranteed by Reliance Industries.
Reliance Trends to launch 100 stores; seeks franchisees
Feb 08, 2012
Reliance Retail’s fashion apparel arm Reliance Trends is planning to launch more than 100 stores in the country by the end of this fiscal. The company is currently testing the franchise route and has already undertaken one or two pilot projects to gauge the prospects. At present, it operates 75 stores across India.
Talking to the media, Reliance Trends senior vice president and head, national operations, Akhilesh Prasad said that the company was also planning to open 25 stores in the eastern region by the end of next financial year.
Reliance Trends houses some of the best brands from various parts of the world including their own collections. The store’s core principle is: ‘Fashion at great value’. It offers a mix of private brands across men’s, women’s and children’s categories.--
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Reliance Industries' eastern offshore KG-D6 gas fields may see a further decline in output until new wells are brought to production, the company's minority partner Niko Resources has said.
Niko, which holds 10 per cent stake in the RIL-operated KG-DWN-98/3 or KG-D6 block off the Andhra coast, said its share of gas production in the October-December quarter from the D6 block "averaged 143 million cubic feet per day compared to 195 mmcfd in the prior year's quarter".
The figures put out by Niko in its third quarter earning statement this week, represent 10 per cent of the total output from KG-D6. KG-D6 output in October-December, according to Niko's statement, should be 40.49 million cubic meters per day as compared to 55.21 mmcmd in the same period a year earlier.
D6 gas production in December averaged approximately 137 mmcfd (38.79 mmcmd for the entire block), Niko said.
"Declines are expected to continue until workovers are completed and/or additional wells are tied in," it added.
The current output is less than half of the peak 80 mmcmd that RIL had projected as fewer wells were drilled than planned and six wells ceased to produce due to the entry of sand or water.
RIL has so far drilled 22 wells on Dhirubhai-1 and 3, two of the 18 gas finds in the KG-D6 block that have been brought to production, but only 18 were put-on production. Of these 18, five have ceased due to water/sand ingress.
The company is to do workovers or maintenance of these well, which may raise the output, Niko said.
MA oilfield in the same block had seen one out of the five wells cease due to the same reasons.
"Oil production from the D6 Block decreased as five wells were producing in the periods compared to six wells for the majority of the prior year's periods and a decrease in production from the remaining wells," Niko said.
The Canadian firm said plans were approved for the development of the first four satellite discoveries around the currently producing D1&D3. "In addition, further development is expected at D6 when the "R complex" and three additional satellite discoveries are added."
These fields can add up to 30 mmcmd to the output. RIL holds 60 per cent interest in the 7,645-sq-km D6 block after farming-out 30 per cent stake in BP Plc of UK.
Production of oil from the MA discovery began in September 2008 and production of gas from the Dhirubhai 1 and 3 (D1&D3) discoveries in April 2009.
The Company has been granted petroleum mining licences for the discoveries expiring in 2028 and 2025, respectively.
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Ambiguous Oil Min order may lead to KG-D6 price revision |
While the Oil Ministry gears up to reject Reliance Industries ' demand for a higher gas price, its order fixing USD 4.20 per mmBtu as price of KG-D6 gas may be ambiguous offering room for revision in rates before the set five-year term. The Oil Ministry had on October 10, 2007, written to RIL fixing USD 4.20 per million British thermal unit as the price of gas from KG-D6 fields for first five years of production, informed sources said. The letter however did not stop at this and went on to state that if RIL was to realise a price higher than USD 4.20 per mmBtu, that rate would be used for determining government's take from KG-D6 block. "If the actual price at which any supplies made to any consumer happens to be higher than the one arrived at by (the formula approved by the Empowered Group of Ministers), then the higher price shall be taken for purposes of the Government take for that quantity," the ministry wrote to RIL on October 10, 2007. It is perplexing why this clause was inserted if the gas price was to be USD 4.2 per mmBtu for five years as the Oil Ministry is insisting now. Sources said the ministry's has prepared a draft reply rejecting RIL's demand for revision in KG-D6 price citing a letter the company wrote on October 24, 2007 accepting the terms set out in the government's October 10, 2007 letter. But the ministry's October 10, 2007 letter alluding to RIL realising a price higher than the one fixed by the EGoM headed by the then External Affairs Minister Pranab Mukherjee, is equivocal. This may be the reason behind RIL's January 6 letter to the ministry seeking revision of "discriminatory" and "sub-market" price for KG-D6, where gas production started in April 2009. It cited liquefied natural gas (LNG) being imported by public sector firms at triple the KG-D6 price to seek a revision. Sources said the ministry's draft rejecting reopening of price before 2014, also relies on the Supreme Court's May 7, 2010 judgement in the gas row between RIL and Anil Ambani's RNRL that stated that government alone has the right to fix the selling price of gas from all fields including KG-D6. RIL, they said, has never questioned the right of the government to approve the gas price and it does not propose to sell fuel without government approval. It has approached the ministry with a request for review of the gas price and would sell the fuel at higher rates only after its nod. Stating that the current price of gas was no longer viable, the company had in the January 6 given the government 90 days to reach an "amicable settlement" over gas pricing. Under the dispute resolution process detailed in the Production Sharing Contract, parties are required to try for reconciliation of differences for three months before heading for arbitration. RIL may be thinking of arbitration on the issue. |
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RAJESH DESAI
Dassault, RIL ink MoU for collaboration in defence sector |
Days after bagging the multi- billion dollar MMRCA deal, French defence major Dassault Aviation has entered into an agreement with Reliance IndustriesLimited for partnering in defence and homeland security sector in the country. "Dassault Aviation, a major player in the global aerospace industry, has entered into an MoU with Reliance Industries, for pursuing strategic opportunities of collaboration in the area of complex manufacturing and support in India," officials of the two companies told PTI. The MoU comes soon after the Defence Ministry on January 31 had offered Dassault the multi-billion dollar deal to supply 126 combat aircraft to the IAF. Sources said there is a possibility of the two companies working together in the Medium-Multirole Combat Aircraft (MMRCA) deal here. After finalising the deal, Dassault will have to reinvest 50% of the worth of the deal back into Indian defence sector. The aerospace and security division of the Reliance Industries is headed by Vivek Lall, who has been closely associated with the MMRCA deal while spearheading the campaign for Boeing in the deal. Lall has earlier worked with American NASA and Raytheon. He was recognised at Cambridge, England, as one of the 2,000 outstanding scientists in the 20th century. In the recent past, there have been efforts by the Mukesh Ambani-headed RIL to position itself in the defence, internal security and aerospace solutions sector. |
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CA. Rajesh Desai
RAJESH DESAI
Mukesh Ambani-led Reliance Industries increased its stake in hospitality firm EIH to 18.53% by picking additional 2.13 crore shares worth Rs 192 crore through an open market transaction. RIL subsidiary Reliance Industries Investment and Holding Pvt Ltd purchased 21,315,000 shares of EIH (accounting for 3.73% stake) for Rs 90 apiece valuing the deal to Rs 191.83 crore, according to information available with the stock exchanges. As of December quarter, Reliance Industries Investment and Holding Pvt Ltd held 84,592,273 shares or 14.8% stake in EIH. Meanwhile, two promoters -- Gaylord Impex and Pivet Finances of EIH Ltd have exited the company by offloading their entire stake. Gaylord Impex sold 88,19,683 shares of the company, while Pivet Finances 1,24,82,720 offloaded equities in the hospitality firm. The shares were sold at Rs 90 apiece. In September 2010, RIL had acquired a 14.12% stake in EIH, which operates hotels and resorts under the Oberoi and Trident brands, for Rs 1,021 crore at a premium of 22% per share. |
CA. Rajesh Desai
RAJESH DESAI
Oil Min to seek Law Min's opinion on RIL demand |
The Oil Ministry is likely to refer Reliance Industries'demand for an increase in price of natural gas it produces from eastern offshore KG-D6 fields to the Law Ministry. "We will take an opinion of the Law Ministry before proceeding on the issue," an Oil Ministry official said here. RIL had on January 6 written to the Oil Ministry and the Prime Minister's Office (PMO) seeking a gas price revision, saying the current USD 4.2 per million British thermal unit rate for KG-D6 gas was "sub-market" price compared with three times higher price being paid for imported gas (LNG). The PMO subsequently asked the oil ministry to legally examine if the government can allow RIL to increase the price. The government had in 2007 fixed USD 4.20 per mmBtu as the price of gas produced from KG-D6 fields for first five years of production. KG-D6 fields started production in 2009. But the Oil Ministry's letter on October 10, 2007, informing RIL of the pricing decision did not stop at this and went on to state that if the company was to realise a price higher than USD 4.20 per mmBtu, then that rate would be used for determining government's take from KG-D6 block. Sources said it is perplexing why this clause was inserted if the gas price was to be USD 4.2 per mmBtu for five years as the Oil Ministry is insisting now. RIL had originally proposed a rate of over USD 4.3 per mmBtu for first three years of production which was later tweeked by an Empowered Group of Ministers (EGoM) to USD 4.2 per mmBtu for five years. "If the actual price at which any supplies made to any consumer happens to be higher than the one arrived at by (the formula approved by the EGoM), then the higher price shall be taken for purposes of the Government take for that quantity," the ministry wrote to RIL on October 10, 2007. This clause in the oil ministry letter may be the reason behind RIL's January 6 letter seeking revision of "discriminatory" and "sub-market" price for KG-D6. Sources said the ministry is not inclined to accept RIL request on the grounds that RIL had accepted to keep price stable at USD 4.2 per mmBtu for five years. It is also relying on the Supreme Court's May 7, 2010 judgement in the gas row between RIL and Anil Ambani's RNRL that stated that government alone has the right to fix the selling price of gas from all fields including KG-D6. When the nation can pay USD 12-14 per mmBtu price to overseas producers of liquefied natural gas (LNG), the domestic gas producers too deserve an equivalent price. While high imported LNG price gives no incentive to the government, a higher domestic price would fetch it higher revenues in form of royalty, taxes and profit petroleum. |
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CA. Rajesh Desai
RAJESH DESAI
RIL keen on Cairn crude for Jamnagar SEZ refinery |
Reliance Industries wants to buy Cairn India 's Rajasthan crude oil for processing at its only- for-exports Jamnagar refinery in Gujarat and has approached the government for its approval nod for the same. RIL currently buys 80,000 barrels per day (bpd) or 4 million tonnes a year crude from Rajasthan, that it processes at its old 33 million tonnes a year domestic tariff area (DTA) refinery on the West Coast. It has now applied to the government to buy another 30,000 bpd of Cairn crude for turning it into fuel at its 29 million tonnes SEZ (Special Economic Zone) refinery adjacent to the old unit. Official sources said the company's request would be considered by the Board of Approval, headed by Commerce Secretary Rahul Khullar, next week. Any sale to a SEZ or only-for-exports unit is considered outward shipment or exports out of India. The current policy does not allow export of domestically produced crude oil. RIL's request comes just when Cairn is beginning to ramp up production from Rajasthan fields. Cairn currently produces 125,000 barrels per day from Mangala oilfield, the largest find in the Rajasthan block. Another 20,000 bpd is produced from Bhagyam fields. Mangala can go up to 150,000 bpd or 7.5 million tonnes a year anytime now while Bhagyam has an approved peak of 40,000 bpd and can go up to 60,000 bpd with more investments. Sources said Cairn currently sells 15,000-20,000 bpd to state-owned Indian Oil Corp (IOC) and another 30,000-40,000 bpd to Essar Oil. RIL's refinery complex at Jamnagar, consisting of the old DTA refinery and an SEZ unit, are connected by a heated pipeline to the Mangala field in Rajasthan.
Rajasthan crude is very heavy with API (American Petroleum Institute) gravity between 25-30. Also, waxiness of the crude turns it into solid at room temperature. Transportation of the Rajasthan crude therefore, requires special heating arrangements in the pipeline to keep the crude Sources said RIL's SEZ refinery, which is designed to process far heavier crudes, is unable to use Rajasthan crude as the same has been classified as a restricted item under the current Foreign Trade Policy (FTP) provisions. The unit has, therefore, sought approval of the BoA for the importing crude oil from Cairn India. |
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CA. Rajesh Desai
RAJESH DESAI
Why is RIL falling inspite of Buyback going on?--
Tanya Mehra.
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CA. Rajesh Desai
RAJESH DESAI
Reliance Industries appears unattractive for retail investors
However, there is little clarity on where its incremental profits would come from. There is still time before its investments in diverse businesses start making their presence felt and in the immediate future all its existing businesses appear to be under pressure.
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CURRENT SCENARIO
Reliance Industries (RIL) is currently facing problems in all its key business verticals. Natural gas output from its KG-D6 block has been on the decline for more than a year, and is likely to continue falling well into FY13 and FY14.
The company's latest status report to the petroleum ministry mentioned that the production is likely to fall from 35 mmscmd now to 27.6 mmscmd in FY13 and 22.6 mmscmd in FY14.
Its refining business is witnessing a margin squeeze as an economic slowdown lowers demand for fuels. The company's December 2011 quarter saw its gross refining margins dip to a two-year low of $6.8 per barrel. Similarly, a slowdown in demand for petrochemicals and polymers is having an adverse impact on RIL's third important business segment.
The margin pressure is likely to continue, at least, for another year until the global economy improves. Besides business problems, the company has other woes. For more than two years, RIL has been trying to get a reprieve in two of its cases with market regulator Sebi, one over the breach of insider trading norms in 2007, and another over the breach of creeping acquisition norms in 2000.
At the same time, its production-sharing contract for the prized KG-D6 block has come under criticism by the country's audit watchdog CAG, which recommended its immediate review. RIL's capital expenditure for the KG-D6 block is also being reassessed.
RIL's recent disclosure of its stake in several ETV channels surprised investors and prompted Sebi to launch an examination to ascertain whether the company had made proper disclosures in the past.
NEW INITIATIVES
RIL has long been taking initiatives to enter a variety of different industries. It has been present in the organised retail business for over five years and has invested $3.15 billion in shale gas assets in the US.
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In addition, the company has bought strategic stakes in various companies, the most recent being the acquisition of an undisclosed stake in the TV18 Group and a 14.8% stake in East India Hotels.
FINANCIALS
RIL became debt-free at the net level by the end of December 2011 as its cash balance of Rs 74,539 crore exceeded the debt on its books. For the first nine months of FY12, its net profit grew 6% to Rs 15,804 crore, while net sales jumped 39.4%.
Its operating and net profit margins have been consistently under pressure and dipped to multi-year low levels in the Dec ember quarter. The company's share buyback programme is currently under way to buy up to 12 crore shares for a maximum price of Rs 870.
VALUATION
The RIL scrip is currently trading at a price-to-earnings multiple of 12.3 and price-to-book value of 1.8. These are low when compared to the company's historical valuation levels. However, in view of the problems ahead for the company they don't appear attractive for a retail investor.
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CA. Rajesh Desai
RAJESH DESAI
The Comptroller and Auditor General (CAG) has found deficiencies in the KG-D6 contract that was awarded to Reliance Industries in 2001, CNBC-TV18 has learnt.
The CAG faulted the Oil Ministry and its technical arm, the Directorate General of Hydrocarbons (DGH), for allowing RIL to retain the entire 7,645 sq km KG-DWN-98/3 (KG-D6) block in the Bay of Bengal after the giant Dhirubhai-1 and 3 gas finds were made in 2001 because-- as per the PSC, RIL should have relinquished 25% of the total area outside the discoveries in June, 2004, and 2005, but the entire block was declared as a discovery area and the company was allowed to retain it.
However, CAG has handed over the matter to Public Accounts Committee (PAC) which is scrutinising the findings CAG on the KG-D6 gas block.
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CA. Rajesh Desai
RAJESH DESAI
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CA. Rajesh Desai
RAJESH DESAI
RIL is making money from money, not from oil
Reliance Industries reported at net profit of Rs 4,236 crore for the quarter ended March 2012, slightly below market expectations of Rs 4,300 crore. The profit is 21 percent down from a year ago and 4.6 percent down from the previous quarter.
The company was saved the blushes of a more serious drop in net profits by its huge cash hoard, which pushed up other income by 33 percent to Rs 2,295 crore from the preceding quarter, and a two-and-a-half times jump from other income in the corresponding quarter of 2010-11.
Net sales for the same period came in at Rs 85,182 crore, up from Rs 72,674 crore a year ago.
The profit is 21 percent down from a year ago.
The gross refining margin (GRM), a measure of profitability of its refining operations, was $7.6 dollars per barrel. The refining margin is is the difference between the total value of petroleum products and the price of crude.
Analysts expected the GRM to be largely flat on quarter-on-quarter basis. The company had reported GRM of $6.8 a barrel in the December-ending quarter.
The company has proposed a final dividend of 85 percent.
Reliance’s shares has been under pressure for the past two days due to concerns over the results.
The stock ended Friday down 1.5 percent at Rs 731.
Source: Reliance Industries Ltd
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CA. Rajesh Desai
RAJESH DESAI
RIL Q4 net down 4.6% at Rs 4236 cr; GRM surprises street
Mukesh Ambani Group's flagship company Reliance Industries 's net profit fell 4.6% QoQ to Rs 4,236 crore in the quarter ended March 31, 2012 from Rs 4,440 crore in the previous quarter.
Gross refining margin came in higher than expectations at USD 7.6 a barrel as against USD 6.8 a barrel in the previous quarter.
Revenues from its petchem segment increased 8.25% to Rs 21,412 in Q4FY12 from Rs 19,781 crore in the previous quarter.
Oil & gas division's revenues fell 7.91% to Rs 2,608 crore from Rs 2,832 crore during the same period.
Petchem EBIT margin declined at 10.2% versus 10.9% during the same period.
Reliance has decided a final dividend at 85% to the face value of Rs 10 a share.
For the year ended March 31, 2012, the company posted gross refining margin at USD 8.6 a barrel as against USD 8.4 a barrel in last fiscal.
Oil & gas producer's net profit for the fiscal 2011-12 dropped to Rs 20,040 crore from Rs 20,286 in the earlier fiscal.
However, net sales during the same period jumped 33% to Rs 3,29,904 crore from Rs 2,48,170 crore.
CA. Rajesh Desai
RAJESH DESAI
Reliance Industries annual report 2011-12: Ten things to note
Reliance Industries, the energy-to-retail conglomerate, released its annual report late on Tuesday. The company has disclosed the annual revenue data for the retail business and is bullish about the data services business it plans to roll out soon.
Here are ten things to note if you have an interest in the company:
• Tough year: In his letter to shareholders, Mukesh Ambani, chairman and MD of the company, called 2011-12 a challenging year due to an unprecedented economic uncertainty in Europe, geopolitical upheaval in the Middle East and a slowing down of economic growth across Asia. Reliance Industries net profit for 2011-12 was lower than that of 2010-11. This has happened for the first time in at least 20 years. Reliance has always reported a higher net profit over a previous year.
• Operating profits: The company’s operating profit margin (Operating profit as a percentage of revenue) is at 11.7 per cent, the lowest level in 20 years. This is an indicator of efficiency in the company’s operation. It also shows that the company has to work hard to generate income from operations.
• Net Profit margin: The net profit margin, which is net profit as a percentage of revenue, is the lowest in 10 years at 5.9 per cent. The last time, it saw levels below this was in 2001-02. As a result, the company's market capitalisation is down by over Rs 1,00,000 crore during the year to March 2012.
• Mukesh Ambani’s pay: The annual report highlights that Mukesh Ambani continues to draw Rs 15 crore as annual remuneration against Rs 38 crore approved by shareholders.
• Related parties: Loans and advances to related parties stand at Rs 10,243 crore against Rs 7,108 crore. The annual report lists 138 related entities that are subsidiaries or associate companies of Reliance Industries or owned by the promoter group. RIL paid Rs 1,508 crore as hire charges and electric power, fuel and water charges to associate companies. These include Reliance Utilities and Power Private Rs 369 crore (Previous Year Rs 292 crore), Reliance Utilities Rs 771 crore (Previous year Rs 625 crore). Hire charges were paid to Reliance Industrial Infrastructure Rs 21 crore (Previous Year Rs 22 crore), Gujarat Chemicals Port Terminal got Rs 66 crore (Previous Year Rs 44 crore), Reliance Gas Transportation Infrastructure Rs 235 crore (Previous Year Rs 652 crore), Reliance Ports and Terminals Rs 86 crore (Previous Year Rs 72 crore), Reliance Corporate IT Park Limited Rs 1 crore (Previous Year ` NIL).
• Outlook: The refining business accounts for two-thirds of the company’s net sales and 40 per cent of the company’s profit before interest and tax (PBIT). The profitability is under pressure, according to latest quarterly results. The annual report says that the company is taking steps to strengthen its competitive position by cutting costs. These include petcoke gasification to achieve a sharp reduction in the energy cost. These measures are being supplemented by many others that seek to improve the refinery yield pattern.
• Cash: RIL’s cash and cash equivalents as at March 31, 2012 amounted to Rs 70,252 crore ($ 13.8 billion). The increase in cash was primarily driven by a receipt of the balance consideration from BP, the global energy giant. Bulk of this money is lying in banks or fixed return instruments. The company holds its annual general meeting on 7 June 2012 in Mumbai.
• Debt free: As on March 31, 2012, RIL’s total debt was at Rs 68,259 crore ($ 13.4 billion). Over 86% of its long-term debt and almost all of RIL’s short-term debt was denominated in foreign currencies. This makes RIL a debt-free company since the cash it holds is more than the debt.
• Reliance Retail: During the year under review, Reliance Retail witnessed strong growth in sales from existing stores (20 per cent) and also added new stores. At a consolidated level, Reliance Retail has posted revenue from operations of Rs 7,599 crore for the financial year representing a growth of 25 per cent over last year. The company has 1,300 stores in various formats and plans to grow the 'density' of every store.
• Infotel Broadband: There is no financial update in the annual report on the new business other than highlighting the potential for wireless broadband services in India. The company’s owns 479 crore shares of Infotel Broadband services worth Rs 4,795 crore.
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CA. Rajesh Desai
RAJESH DESAI
Reliance Retail, a unit of Mukesh Ambani-controlled Reliance Industries, posted a 25 per cent revenue growth in 2011/12 as demand at existing stores remained robust, Reliance Industries said in its annual report.
Reliance, which disclosed its retail unit's performance for the first time, reported revenues of 75.99 billion rupees in 2011/12.
Its same-store sales growth jumped 20 per cent in most of its retail formats, the company said.
Same-store-sales growth records the performance of stores that are at least a year old and is a key guage of profitability for retailers.
Reliance, which added 200 stores across various formats in 2011/12, runs 1,300 retail stores at the end of the financial year ended March 31, 2012.
Out of the total store count, it operates 700 hypermarkets - supermarkets under its value format - which is the largest contributor to its revenues.
The company operates over 15 distribution centres for fresh food and over 50 facilities comprising collection centres and processing centers.
Copyright @ Thomson Reuters 2012
CA. Rajesh Desai
RAJESH DESAI
Reliance to strengthen homeland security with their 4G network
By Manan Kakkar | May 11, 2012, 9:30pm PDT
Summary: Along with consumer services like LTE devices and local content, Reliance will let security agencies in the country use their infrastructure for homeland security.
Mukesh Ambani is making his re-entry into the telecom industry with Reliance Infotel and 4G after handing over his previous brainchild Reliance Communications to younger brother Anil Ambani in a family dispute. This time around, Mukesh Ambani’s Infotel is a 95% acquisition and at the moment it doesn’t look like Infotel will go head-to-head with either Reliance Communications or the likes of Vodafone and Airtel. As of now, Infotel is working on rolling out 4G services across India. They are focusing on broadband connectivity and are the only company with a pan-India 4G license.
In their annual report (PDF link), the company elaborated on their plans. Reliance’s pitch is the poor broadband penetration (their estimates are 13 Million connections) in India. Reliance believes broadband will impact every aspect of the community, business to business transactions, health, education, entertainment etc. In the report, Reliance highlights the growing number of LTE supported devices and the ability to tether high-speed connectivity on mobile devices. The company says they will offer local content to complement the devices and service.
The other interesting note in the report is Reliance’s plan to leverage the pan-India Infotel infrastructure for homeland security in India. Post the horrific 26/11 terror attacks on Mumbai, the private sector and governments have been working on improving the country’s intelligence and security. Quoting the relevant part from the annual report:
Reliance will also leverage its broadband network to support the requirements for homeland security applications and services, which can benefit from the advantages of low latency and assured quality of services that are integral to 4G networks. Insurgency and terrorism have become global challenges, and in light of the recent terrorist attacks on major cities, the citizens of India have a dire need for digital surveillance and security services. The traditional security platforms have been found inadequate to address the new challenges associated with global terrorism and there is a need to support the efforts of our law enforcement agencies with intelligent and realtime electronic and digital solutions. Reliance is working with global partners to bring state-of-the-art homeland security solutions to the Indian market.
The fact that Reliance thought about using their infrastructure for the country is admirable in itself. With the government working on improving the network infrastructure for the armed forces and private sector pitching in for internal security, India seems to be on the right path.
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CA. Rajesh Desai
RAJESH DESAI
Reliance Industries: The fifth year and counting… ::CLSA
The fifth year and counting…
After its recent 15% correction, 2012 is now Reliance’s fifth straight year of
relative under-performance. We foresee some triggers emerging by year-end but
singular variables, such as a gas price hike or the telecom foray, may not be
enough for a sustained re-rating. Reliance needs to create a deep portfolio of
projects to rekindle investor interest. Further, these may need to be in the energy
chain; its ~US$8.5bn non-core portfolio has been a drag on performance. Reliance
has been more reticent here than we had expected clouding its long term outlook.
Reliance has now been under-performing for five years
After its 15% correction since mid-Feb, Reliance’s stock is now under-performing the
Sensex in 2012 – the fifth year in succession. Over this time, FY09-14 earnings have
been cut 18-44%. This is continuing; we recently cut FY12-14 EPS by 2-7% to factor in
lower KG-D6 volumes and SOTP by Rs25/sh to factor in a 30% cut in D1-D3 reserves
to 7tcf. Our current FY13 estimate (~Rs69/sh, similar to consensus) implies a ~30%
rise in EPS over the 4Q run-rate. This is predicated on a weaker currency (Rs53/US$),
a US$1/bbl rebound in GRMs and higher other income but we concede downside risks.
Triggers may emerge by end 2012 but may be short-lived
We expect the EPS momentum to start rebounding when the polyester expansions
begin to come on-stream from early 2013. By this time, we expect the 4G telecom
launch, indications of higher gas prices and more detail on the retail foray to help.
These triggers are likely to short-lived, however, as singular variables may not be
enough for a re-rating. For example, while higher gas prices will renew the E&P thrust,
NAV impact is limited (US$1 = 1.5%) while EPS impact (US$1 = ~3%) will accrue only
from FY15. Similarly, our telecom analyst cautions that infra challenges and lack of a
4G device eco-system may force Reliance to bundle 2G voice implying higher capex.
Reliance needs to build a deep portfolio of projects in the core energy chain
In our view, therefore, Reliance needs to create a portfolio of +15-20 projects like its
global energy peers have, to rekindle investor interest. Historically, sustained project
growth has driven stock performance by driving EPS growth across cycles. This is now
sorely missing; ten year profit Cagr has dipped below 20% for the first time in history.
Reliance can take on another ~US$30bn of projects but has been reticent
Reliance has been more reticent on new projects than we had expected it to be,
though; perhaps because of poor returns from the US$17bn KG-D6, RPET projects and
the +50% fall in US gas prices since the time it acquired its shale gas assets. For
example, gross block will be flat over FY10-15 despite US$12bn outlay on downstream
projects as the olefins, IGCC projects are yet to commence in earnest. Indeed, given
its cash (US$15bn), operating cashflow (US$6-7bn annually) and capital serving
needs, it can easily invest an additional ~US$30bn without stressing its balance sheet.
Non-core investments have been a drag on returns and stock performance
Further, these projects may need to be in the core energy chain. Its ~US$8.5bn noncore
investments (~20% of balance sheet) across multiple verticals have been a drag
shaving off ~3ppt from ROACE; the retail venture, for example, is still incurring losses
even after five years of operation. Nonetheless, with the stock trading at 11x PE and a
25% discount to our NAV and triggers emerging by end-2012, we maintain O-PF.
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CA. Rajesh Desai
RAJESH DESAI
Gassification business will add 40% to Jamnagar's margins:Mukesh Ambani
Eyeing digital services for entertainment:Mukesh Ambani
Eyeing digital services for healthcare and security:Mukesh Ambani
In the process of building largest gasification plant:Mukesh Ambani
Petro-chem capacity expansion continues in full swing:Mukesh Ambani
Expect petro-chem capacity to rise to 25 million tonne:Mukesh Ambani.
Reliance's refining margins in excess of $8/barrel:Mukesh Ambani
Volatility in global crude oil prices have deterred profit growth:Mukesh Ambani.
RIL to create new opportunities in retail sector:Mukesh Ambani.
AGM tit bits----
Investment in organised retail to create more jobs: Mukesh Ambani.
Business impacted by inflation, subsidies and lower growth: Mukesh Ambani.
RIL bought back 27.9 million shares so far: Mukesh Ambani.
--On Thu, Jun 7, 2012 at 9:18 AM, Mihir Desai <desaim...@gmail.com> wrote:
Reliance Industries will be in spotlight ahead of its annual general meeting (AGM) scheduled today, 7 June 2012. Investors will closely watch the announcements relating to declining gas production at Krishna Godavari D6 block, utilization of massive cash reserve, 4G rollout plans and organised retail updates in the RIL's 38th AGM.--
CA Mihir Desai
CA. Rajesh Desai
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CA. Rajesh Desai
RAJESH DESAI
RAJESH DESAI
RAJESH DESAI
Sign gas supply pact with units of urea cos: Govt to RIL
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CA Mihir Desai
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CA. Rajesh Desai
RAJESH DESAI
Does any one know why RIL is rising today?
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CA. Rajesh Desai
RAJESH DESAI
To accomplish that, Goldman Sachs in its report said that Reliance needs to get government approvals on investments and gas prices, restrict its focus to core businesses and return some of its surplus cash in the form of dividends or buybacks, among other measures.
Goldman has argued that investor concerns such as returns from new capital spending or the cyclical downturn are already largely discounted.
"Current share price is giving little credit to management for refocusing investment in core activities and its potential impact on cash returns, in our view," Goldman said.
The investment bank has maintained its "buy" rating on the stock and has raised its sum-of-the-parts target price to Rs 936 from Rs 870 to reflect improved refining and exploration and production valuations.
ET had reported today that Reliance Industries is in talks with British oil giant BP to buy its petrochemicals plant in Malaysia as it seeks to replicate its domestic success in building fully integrated operations in all its businesses.
India's largest private sector company has held talks with BP officials in Hong Kong about the 610,000-tonne PTA plant in Malaysia. "Serious discussions are happening," an investment banker with direct knowledge of the matter said. "BP will never comment on speculation," Zukifli Othman, manager (communications & external affairs), BP Malaysia, told ET.
MUMBAI: Reliance Industries is in talks with British oil giant BP to buy its petrochemicals plant in Malaysia as it seeks to replicate its domestic success in building fully integrated operations in all its businesses.
India's largest private sector company has held talks with BP officials in Hong Kong about the 610,000-tonne PTA plant in Malaysia. "Serious discussions are happening," an investment banker with direct knowledge of the matter said. "BP will never comment on speculation," Zukifli Othman, manager (communications & external affairs), BP Malaysia, told ET. An RIL spokesperson did not respond to a set of questions on the issue till the time of going to press.
The plant may not be worth much (about 250 crore is the estimate from independent industry executives), but it could ensure that RIL's operations in Malaysia are fully integrated, as they are in India. Integration (where all raw material is produced in the same group) helps cut costs and ensure supply in hard times.
RIL's Malaysia assets were bought from Hualon, the South-East Asian nation's largest polyester maker, in 2007 when polyester profit margins had plummeted.
The acquisition of the PTA plant in Kuantan - located in the state of Pahang on the east coast of Malaysian peninsula - will help RIL integrate it with Hualon's polyester capacities. The world's largest polyester producer is currently buying PTA from local producers.
BP kicked off a $38-billion divestment programme in 2010 to reposition itself as a smaller company with focus on promising markets, and to raise cash to shore up investor confidence following the oil spill in the Gulf of Mexico. Since then, it has divested assets worth $24 billion.
In September 2010, BP sold its ethylene and polyethylene capacities in Malaysia to state-run company Petronas. The British petroleum giant aims to divest another $14 billion of assets by the end of next year.
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CA. Rajesh Desai
RAJESH DESAI
Reliance Industries - Refining: Positive longer-term view; company update; Buy: Edelweiss
RAJESH DESAI
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CA. Rajesh Desai
RAJESH DESAI
NSEI Block Deal: Reliance Industries 101154 shares at 860.50 INR
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CA. Rajesh Desai
RAJESH DESAI
NEW DELHI: Reliance IndustriesBSE 0.43 % is likely to bid for mobile
telephone spectrum in the upcoming auction to complement its wireless
broadband services with voice call facility.
The oil-to-textile group headed by billionaire Mukesh Ambani is making
a re-entry into the telecommunication business and is being talked as
the most aggressive bidder in the November auction of telecom
spectrum.
Sitting on a cash-pile of Rs 70,732 crore at the end of the June
quarter, RILBSE 0.43 % was the most notable participant at the pre-bid
conference organised by the Department of Telecom (DoT) in the run-up
to the auction.
RIL is most likely to put a direct bid, a source privy to the
development said. If for some reasons it is unable to make a bid by
itself, the company may fund purchase of spectrum by another company
and then acquire it.
A company spokesperson declined to comment on speculation about the
issue.
The company had in 2010 re-entered the telecom space after it acquired
Infotel Broadband which had won pan-India spectrum for offering high-
speed internet broadband.
The pan-India spectrum that RIL holds through Infotel Broadband does
not has permission to provide voice calling facility.
Any spectrum that does not allow voice calls is not a big revenue
earner and so RIL as the next logical step would want to acquire
spectrum which it can bundle its high speed mobile broadband service,
the source said.
The government plans to begin auction of spectrum vacated from
cancellation of 122 telecom licenses by the Supreme Court, from
November 12.
The source said representatives of RIL subsidiary Infotel Broadband
have been attended meetings organised by Department of
Telecommunications on proposed spectrum auction.
RIL entered in to telecom business by acquiring Infotel Broadband on
the day the later won pan-India airwaves frequencies for Rs 12,847.71
crore in 2010.
The company has already revealed its plan to use LTE technology for
its country wide network deployment but is yet to start its services.
Government has plans to auction airwaves frequencies in 1800 Mhz band
and 800 Mhz band which are being currently used for GSM and CDMA
mobile telephony services respectively.
A new player bidding for 1800 will have to pay minimum of Rs 14,000
crore for pan-India services and for 800 Mhz band it is Rs 9,100
crore.
According to auction rules, for 1800 Mhz band, new entrants will be
required to bid for minimum of 4 blocks each of 1.25MHz in each
service area and for 800 Mhz band it is minimum of 2 blocks each of
1.25MHz in each service area.
RIL has plans to provide digital services in key domains of national
interest such as education, healthcare, security, financial services,
government-citizen interfaces and entertainment.
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RAJESH DESAI
Mumbai, October 3, 2012: Reliance Industries Limited (RIL) and the Venezuelan state oil company, Petroleos de Venezuela, SA (PDVSA) have signed a 15 year heavy crude oil supply contract and a Memorandum of Understanding (MOU) with PDVSA to further development of Venezuelan heavy oil fields.
PDVSA will supply between 300,000 and 400,000 barrels per day of Venezuelan heavy crude oil to Reliance’s two refineries in Jamnagar under a 15-year crude oil supply contract.
As per the MOU, Reliance will explore upstream options for joint participation in heavy oil projects of the Orinoco Oil Belt.
RIL will also cooperate with PDVSA by providing technical assistance and sharing its experience of executing large scale projects in areas of offshore upstream, refining and other downstream projects.
The signing of the contract and MOU marks further strengthening of the long-standing relationship between RIL and PDVSA.
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Reuters) - Morgan Stanley cut its rating on Reliance Industries to 'underweight' from 'equal-weight', citing lack of near-term triggers, expectations for weaker refining margins and valuation.
The investment bank also cited concerns about Reliance's investments into businesses that offer "low" return-on-equity, as well as a subdued outlook on petrochemicals in a noted on Monday.
Morgan Stanley cut its price target on the stock to 703 rupees from 742 rupees. Reliance shares were down 1.2 percent at 847.20 rupees as of 9:36 a.m.
(Reporting by Abhishek Vishnoi; Editing by Gopakumar Warrier)
MUMBAI: The country's largest corporate Reliance IndustriesBSE 0.55 %
(RIL), which is sitting on a cash pile of nearly Rs 73,000 crore, is
on a debt-raising spree again and has mopped up $ 1.5 billion through
an overseas bond sale progamme over the weekend, two people with the
direct knowledge of the development said.
With the latest debt raising, the Mukesh Ambani-led oil, gas,
petrochemicals and retail giant has raised $ 4 billion so far this
year, with the first two being a $ 1.5-billion issue in February and
another $ 1 billion issue in May.
While RILBSE 0.55 % spokesperson refused to comment, the banks which
snapped up the issue could not be reached.
Of the $ 2.5 billion raised by RIL (which still is one of the least
leveraged large corporates in the country with less than 0.50 percent
debt-equity ratio) earlier, the proceeds from first issue of $ 1.5
billion were mopped up by its US subsidiary for its shale gas
programme, while the other was meant for its Jamnagar complex
expansion.
The current funds will also be used to finance its capital expansion
programme as planned.
The latest unsecured syndicated loan has two maturities. While $ 1
billion are a six-year US dollar money, the rest $ 500 million are a
7.25-year money, according to sources, who did not reveal the pricing
of the issue.
This is the first longest tenor unsecured syndicated debt raised by an
Asian issuer this year.
The instrument, sold in the North American, European, Asian and
Australian markets, was snapped by as many as 28 international and
domestic banks with the major ones being State Bank, Bank of America,
Bank of Nova Scotia, the ANZ Banking Group, Bank of Tokyo Mitsubishi,
Sumitomo Mitsubishi Banking Corp, HSBCBSE 0.24 % Group and RBS, the
sources said, adding the i-banking arms of these bankers acted as the
merchant bankers to the deal.
The sources also said, the company, which has a AAA rating, did not
encourage oversubscription and also did not do any marketing but sill
got full subscription.
Many domestic companies, mostly banks, have been selling their debt in
overseas markets this year.
After RIL, SBI's $ 1.25-billion bond sale in July was the largest so
far this year. It was followed by Exim Bank's $ 750 million debt sale
in two installments in August and September.
Others who raised money from overseas bond market include ICICI
BankBSE -1.57 %, Bank of India, Union Bank, Indian Overseas BankBSE
-2.85 %, Syndicate BankBSE -0.35 %, Axis BankBSE 0.00 %, and IDBI
BankBSE -1.88 %, who have raised more than $ 3 billion in the past two
months.
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Reliance Industries-owned Infotel Broadband Services is understood to have hired Arvind Rao, former managing director and chief executive of mobile value-added services company OnMobile Global, to drive its proposed fourth generation (4G) broadband services.
Rao, also co-founder of OnMobile, has joined Infotel as head of innovation and platform, according to highly-placed sources. On being asked, Rao declined to comment. A spokesperson of Reliance Industries said the company would not comment on individuals joining it. “Neither can we confirm nor deny,” the spokesperson replied in a text message.
As head of innovation and platform, Rao is expected to play a major role in the initial rollout of 4G, as well as fine-tuning the core platform which will offer voice, video and data services. An industry veteran with 14 years of experience in the wireless telecommunications and emerging technologies sector in the US, he had resigned from OnMobile in July this year, over a “corporate governance issue”. After a special review conducted by the company identified “weaknesses in some process” that “took place during his tenure”, Rao offered his resignation and this was accepted by the OnMobile board of directors.
After that, the company discontinued any engagement with the entities owned or invested in by Rao.
A BTech from IIT Bombay and Master of Science from the University of Wisconsin, he had a successful career in private equity and venture capital businesses after an MBA in finance from the Wharton School of the University of Pennsylvania. He also had a stint at McKinsey & Co, with focus on the electronics sector.
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Mumbai: Reliance Industries Ltd’s (RIL’s) much-anticipated launch of wireless broadband, or the so-called fourth-generation (4G) services, is scheduled for early 2013 in New Delhi and Mumbai, according to one of the company’s executives who did not want to be identified, given the secrecy associated with the project.Indeed, work on the project is, at least from the outside, progressing much more quietly than it did on two other launches overseen by chairman Mukesh Ambani and his close associate and colleague Manoj Modi—those of the company’s telecom operations in December 2002, and retail business in 2006.In terms of sheer ambition, though, the 4G project has the trademarks of the typical Ambani initiative.“In the first two years, we will cover 50 metros and all of India by the fourth year,” said the executive. “Various demos are on as we speak.”An email sent to the company on 26 June seeking comment for this story elicited no response.
The project itself would have been in the works for a little over 30 months by the time of launch.In June 2010, RIL bought out the only winner of wireless spectrum across India, Infotel Broadband Services Ltd, for Rs 4,800 crore (around $1 billion then) and its total planned investment in the new business was touted to be around $5 billion.“Our digital services business will revolutionize the lives of millions of Indians by giving them access and opportunities,” Ambani emphatically stated at the company’s annual general meeting (AGM) on 7 June. “We plan to provide an ever growing range of digital services in key domains of national interest such as education, healthcare, security, financial services, government-citizen interfaces and entertainment.”Ensuring that this happens is Modi, who spearheads the oil-to-yarn conglomerate’s new consumer-focused businesses such as telecom and retail. He oversees a team of “around 700 employees based out of Mumbai and a few units in other cities” who are working on the 4G project, said the executive mentioned above.But the dream remains that of Ambani, who led the erstwhile undivided RIL’s entry into telecom with Reliance Infocomm Ltd. In December 2002, Reliance Infocomm launched its telecom services with free mobile handsets and low call rates, transforming the industry and kick-starting a mobile telephony boom that lasted till the end of the decade.A subsequent family feud saw the Reliance empire being carved up between Mukesh Ambani and his younger brother Anil Ambani in 2005; telecom went to the latter. Mukesh Ambani, however, continued to harbour ambitions of creating a new telecom venture that would “revolutionize lives”.At the core of the RIL strategy is content and the company would appear to have learned from the experience of telcos offering 3G services; 3G has seen poor response in India and the RIL executive said this is because of a shortage of innovative content and value-added services. He attributes this to the way telcos split revenue with content and application creators—around 70% goes to the telco, 15% to the content aggregator and the rest to the content creator.RIL, this person added, would not work with aggregators and share as much as 50% of revenue with content creators so as to encourage them to create even better content. Almost 70% of the content that RIL will deliver, this executive said, would be videos—video-on demand, live videos, and “catch-up TV”. And the company will do this across languages and genres.Gaining the edgeIt is here that RIL’s recent investments in television companies such as Network18 Media and Investments Ltd will help. In return for the investment made by it in the Network18 group through a multi-layered transaction, RIL will gain access to the media house’s news and entertainment content across websites, television channels and print, which it can disseminate through its 4G network.“RIL is on a winning wicket since it will be the only national 4G platform provider,” says Jehil Thakkar, head of the media and entertainment vertical at audit and consulting firm KPMG. “A large part of the data usage is driven by media and entertainment, and the investment in Network18 gives RIL the right edge to get started.”Education is another area of focus. In November, Infotel Broadband, through an “affiliate” Reliance Strategic Investments Ltd, acquired a 38.5% stake in an online tutoring company, Extramarks Education Pvt. Ltd. At the time, the company said in a press release that the acquisition was done keeping in mind its digital distribution model.Both entertainment and education were part of Ambani’s so-called triple-play strategy for Reliance Infocomm when it launched. The centrepiece, of course, was voice. That may not be the case this time around, at least in the beginning.The 4G technology that RIL is planning to adopt, TD-LTE (Time Division-Long Term Evolution), was developed primarily for high-speed wireless data services and is considered inefficient for voice services. “They need back-up spectrum specifically meant for voice to be able to provide voice. They may be able to provide some voice services through apps such as Skype and Viber or VoIP (voice over Internet protocol) if the handsets allow it,” said a Mumbai-based analyst at a multinational investment banking firm, who asked not to be identified.On 31 May, the Union cabinet approved the National Telecom Policy (NTP) 2012, a document that sets out goals and objectives for the sector in the next 10 years. NTP 2012 allows almost universal VoIP, a change that is expected to directly benefit RIL. Currently, Indian laws only allow VoIP calls to a telephone in India under strict conditions. They allow such calls between computers within the country’s borders and between a computer in India and a telephone (fixed or wireless) outside India.But voice is no longer a lucrative stream of business.“We don’t see significant risks from VoIP, given little progress elsewhere globally. In addition, voice tariffs are the lowest in India, limiting the scope for VoIP to compete on price,” Rajiv Sharma, an analyst with HSBC Securities and Capital Markets (India) Pvt. Ltd, wrote in a 23 April report. “LTE handsets don’t support voice today, which will be essential in the Indian context in our view.”Such reasoning may explain why the minority view among analysts is that RIL will launch 4G services with voice as one of the offerings and the majority view is that it will acquire a telco.In 2002, RIL had also planned to make its platform an open one and encourage developers and others to create applications for it, taking a leaf out of the strategy of Japanese telco NTT DoCoMo Inc.Things didn’t really work to script back then, but RIL is convinced it will with its 4G operations.“Our platform will be an open one,” the RIL executive said. “We wish to encourage product brands to set up applications for their customers. Dedicated applications for tablets and smartphones will be created.”Taking retail onlineAnd much like in the plan it had in 2002, RIL hopes for some e-commerce play, too; it helps that it has already entered the modern retail business. Indeed, the company gave a hint of its desire to take its retail business digital when its 2011-12 annual report said: “Reliance Retail (Ltd) seeks to add alternative channels to reach out to customers. These channels will provide convenience of any time, anywhere shopping with an access to wide variety of products.”Ambani singled out retail as one of the future “engines of growth” for RIL at the company’s 2011-12 AGM on 7 June, saying revenue from the business will grow six times in the next three-four years to reach Rs 40,000-50,000 crore.Bijou Kurien, president and chief executive of Reliance Retail’s lifestyle business segment, said on the sidelines of a conference in May that e-commerce would be a part of the multi-channel strategy of the conglomerate’s retail arm, and become large and sustainable over a period.“We have various customers across our retail formats catering to retail and institutional customers,” a Reliance Retail executive said, speaking on condition of anonymity. “We will try and develop alternative shopping channels for them where orders can be taken and deliveries made any time and anywhere.” This person added that “broadband wireless will obviously bring in new avenues, thanks to the high speed that it will offer”.RIL appears to be looking at international success stories in this area. Three RIL executives, including the aforementioned Reliance Retail official, cited the example of Tesco Plc’s virtual store format in South Korea that was launched in March when queried on retail models possible with 4G.Tesco Homeplus, the UK-based retailer’s South Korean arm, opened the world’s first virtual store in a subway station in Seoul to help commuters shop using their smartphones while on the move. The search for suitable business models seems to suggest that RIL will do more than just launch an e-commerce website.“Our e-commerce model will not be plain vanilla,” the Reliance Retail executive said.According to a November 2011 report by Avendus Capital Pvt. Ltd on the digital consumer industry, e-retailing is set to become a Rs 53,000 crore market by 2015 from the current Rs 3,600 crore.Ashish Bhide, head of digital media and technology at Avendus Capital, said that e-commerce accounted for less than 0.3% of the overall retail business till March 2011, but was likely to become 1.4% of the total market by fiscal 2015. “One of the biggest enablers of e-commerce is good quality and affordable broadband,” Bhide said. “Both 3G and 4G are expected to drive penetration in India. However, the advantage of 4G is that it would be a big enabler for Internet commerce on devices such as mobile phones.”In Japan and China, transactions on mobile devices account for 15-20% of the e-commerce market.Doing its own thingBut even as it makes sure to get the product right, RIL hasn’t lost sight of one source of its competitiveness across businesses—cost. Two RIL executives, including the one mentioned in the first instance, said the company’s pricing of 4G services would remind consumers of the “Monsoon Hungama” offer launched by the erstwhile Reliance Infocomm in 2003, wherein it offered a multimedia mobile phone and a connection for an upfront payment as low as Rs.501.Thakkar of KPMG said a disruptive pricing strategy can ensure the success of the venture, with the use of tablets and smartphones among middle-class Indian already on the rise.After initially calling for bids for towers and networks, RIL has now decided to build its own, according to a third RIL executive, who spoke to Mint on the sidelines of the company’s shareholder meeting and on condition of anonymity.This person claimed the company would soon start work on its underground cable network and towers. “It will be cheaper for us to build this network organically since the valuation and rentals of such assets is unviable at present. If we can bring down the cost, we can pass on the benefit to the consumers as well. We have built it once while rolling out telecom services in 2002, and we can do it again,” he said.A New Delhi-based telecom expert, formerly a senior executive at a top telco, subsequently said that this could be a negotiating position to force tower companies to bring down their rates.“There are enough and more tower companies and OFC (optical fibre cable) network owners who are looking for tenants. So it is not as if we are short on infrastructure, and I don’t see why rentals will be unreasonable,” said the head of the telecom practice at an international consulting firm, who declined to be identified. “Building own infrastructure, especially towers in urban areas, can be a challenge in terms of cost, space and getting permissions.”Still, a senior government official familiar with the development, who did not want to be identified, said RIL has already started laying back-end optical fibre on the so-called trunk routes, or those that connect network traffic from one part of the country to another, across the nation, and that it would start on the cities later. This person confirmed that RIL had sought and received bids from tower and network companies, but said he didn’t know whether it was the price quoted or some other factor that convinced RIL to do its own thing.If the company insists on building its own infrastructure, it will take longer to roll out its service. The head of the telecom practice with another international audit and consulting firm said RIL should look to leverage the existing towers and OFC network in the country to begin with and look to build its own capacity, if it so wants, gradually over a period of time.The government official also said that RIL is yet to decide on a device or tablet of choice that it could bundle with its service. Still, while gaps remain in terms of what the world knows of Mukesh Ambani’s 4G plans, it is evident that many of the pieces are in place and that a bigger picture is slowly beginning to emerge.***********RIL’S CHOICE: TD-LTETD-LTE is a fourth-generation (4G) mobile communication technology that allows a peak download speed of 100 megabits per second (Mbps) on wireless devices, against 20 Mbps for 3G technologies. Its main advantage, in addition to speed, is that it is an extension of the popular GSM wireless technology and is compatible with both 2G and 3G networks. This essentially means that when a user moves out of an area
covered by a 4G network, he will still be able to access communication services in wider 2G or 3G networks using the same device.
It has a variant called Frequency-Division Long-Term Evolution (FD-LTE).State-run telcos, Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd also operate WiMax technology-based wireless broadband services, but all other operators that won spectrum in the 2010 broadband wireless access (BWA) spectrum auction are rolling out TD-LTE-based services. The US-based mobile chip maker, Qualcomm Inc., recently announced that it was selling its BWA companies in India to Bharti Airtel Ltd in a staggered deal ending in a complete acquisition by end-2014. Bharti has already launched 4G services in Bangalore and Kolkata. Other companies expected to launch services soon include Tikona Digital Networks Pvt. Ltd, Aircel Ltd and Augere Ltd.Shauvik Ghosh in New Delhi contributed to this story.
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plans to invest $ 10 billion on 4G network of its subsidiary
Infotel Broadband (IBSL), one of its vendors 'Spirit DSP'
said today.
The company said it has been selected for providing voice call and
video technology by IBSL.
"Reliance intends to invest $ 10 billion in its LTE (4G) network and
has turned to SPIRIT's software products for voice and video calls
over LTE instead of waiting for phone makers who are slow in offering
handsets transmitting voice and video in 4G networks," Spirit DSP said
in a statement.
IBSL is the only company in the country to have 20 Mhz of pan-India
airwaves that it can use for providing 4G services.
No immediate comments were available from RIL on Spirit DSP's
statement.
Spirit DSP said, through its solution, Reliance will be able to offer
its subscribers high-quality services as an alternative to Skype - an
application for making voice calls using internet connection, over
cellular networks.
At present, most of the people are able to make free calls using Voice
over Internet Protocol ( VoIP) application like Skype but in India
such calls are allowed only between personal computers to personal
computers.
In October, IBSL has informed the Telecom Ministry that it is ready
for trial runs of a technology that would enable voice calls service
on its wireless broadband network and has sought allocation of number
series to test its newly developed 'Voice over LTE (VoLTE) technology.
The telecom arm of RIL has told Ministry that it has developed a
technology in preparation of a unified licensing regime recommended by
the regulator TRAI under which consumers will be able to get voice,
messaging and video using a single device.
Sharing details of its plan, IBSL has said that VoLTE technology would
enable it to work seamlessly with the existing 2G, 3G, NLD and ILD
networks. It added that termination and receiving of calls from these
networks to the IBSL network would be possible through the VoLTE
technology.
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This is the second upward revision in RIL stock price this week. On Monday, CLSA had raised its target price on the stock to Rs. 930.
Nomura retained its "buy" rating on the stock citing an improvement in exploration and production sentiments. Petro-chemical cycle upturn and capacity expansion are getting closer, Nomura added.
At 09.45 a.m., RIL shares traded 1.35 per cent higher at Rs. 859 on the BSE against a 0.07 per cent decline in the Sensex.
Last week, Oil Minister M Veerappa Moily allowed Reliance Industries to explore for oil and gas within the producing fields subject to certain conditions. RIL had proposed to drill an exploration well on the flagging D1&D3 gas fields in the KG-D6 block to study reservoir characteristic.
The ongoing share buyback has also support RIL stock price.
By December 30, Reliance Industries had bought back shares worth over Rs. 3,800 crore from public shareholders since the launch of its share repurchase programme in February -- achieving 37 per cent of the target with less than a month left for its completion. RIL's buyback would end on January 19, 2013.
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| NEW INVESTMENTS |
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“For many decades, we have heard that the U.S. will be independent of foreign imports of energy,” Ambani, whose company operates the largest oil refining complex in the world, said in an interview to be aired today on CNN’s “Fareed Zakaria GPS” program. “Realistically, I can now tell you that it is my judgment this will happen in the next five to seven years,”
Ambani said the “fundamental transformation” in the U.S. energy sector will help drive economic growth this year, according to a transcript of the interview provided by CNN. He said he was “more optimistic than most” about the global economy and that a recovery will begin this year, particularly in the U.S.
When asked what a military strike on Iran would do to the price of oil, Ambani, 55, said that there is “enough spare capacity” in global energy markets to “take care of eventualities,” according to the transcript.
To contact the reporters on this story: Joshua Gallu in Washington at jga...@bloomberg.net
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By Devidutta Tripathy
NEW DELHI | Mon Feb 18, 2013 3:27pm IST
(Reuters) - India will allow wireless broadband airwave holders to provide voice services if they pay an additional $306 million, a senior government official said on Monday, a move likely to boost billionaire Mukesh Ambani's Reliance Industries Ltd (RELI.NS).
Reliance Industries, controlled by India's richest man, is the only company with nationwide fourth-generation (4G) broadband airwaves. The company re-entered the fiercely competitive sector by buying airwaves in a 2010 auction and has so far invested at least $3.5 billion.
Firms which own the broadband wireless access (BWA) airwaves can provide voice services along with high-speed Internet if they pay a fee of 16.58 billion rupees, R. Chandrashekhar, the top bureaucrat at the telecommunications ministry, told reporters.
"There is no restriction on the technology that is being used (to provide voice services)," he said.
A move by Reliance Industries, which is still preparing to launch high-speed 4G Internet services, into the voice market would intensify competition and hurt rivals such as Bharti Airtel Ltd (BRTI.NS) and the Indian unit of Vodafone Group Plc (VOD.L).
Reliance Industries shares extended gains to as much as 1 percent after the news, while shares in Bharti Airtel, the country's top telecommunications carrier, were down nearly 1 percent at 2.50 pm.
The Telecom Commission, the highest decision-making body within the ministry, approved the move on Monday, but it must to be formally signed off by the Telecommunications Minister, Chandrashekhar said.
Voice accounts for almost 85 percent of Indian carriers' revenues, while data is still at a nascent stage. Data services contribute just about 5-6 percent of the total mobile services revenues as fewer people browse the Internet on phones.
Reliance Industries was not immediately available for a comment.
Separately, the Telecom Commission deferred a plan to bring tower companies under the Unified Licensing regime, which is positive for companies such as Bharti Infratel Ltd (BHRI.NS).
If brought under the regime, the tower companies would have to pay an annual licence fee of 8 percent of their revenue and would be required to cut foreign shareholding to 74 percent.
Currently the companies pay no licence fee and a foreign shareholder can own as much as 100 percent of their equity.
(Writing by Aradhana Aravindan; Editing by Daniel Magnowski)
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