Mukesh Ambani-owned Reliance Industries (RIL) has for the first time toppled IndianOil (IOC), the long-time leader, to top the BW Real 500 ranking.
A 41.4 per cent growth driven by a merger with Reliance Petroleum and improved refining margins put it at the top. While IOC’s income fell, it is still more than RIL’s. But RIL’s asset base is larger by 54 per cent. Also, RIL’s debt-equity ratio has fallen to 0.49 from 0.7 thanks to a 15 per cent drop in borrowings. But it remains the biggest borrower in absolute terms in the list with total debt of over Rs 64,000 crore.
What gives RIL the confidence to expand is the 16 per cent jump in its net worth (about Rs 1,41,003 crore). RIL plans to double its enterprise value to $80 billion within the next decade. A Rs 42,000-crore expansion of the Jamnagar petrochemical and refinery complex by 2014 is also planned.
In April, RIL ventured into shale gas exploration — it bought 40 per cent stake in Atlas’s Marcellus Shale acreage ($1.7 billion), 45 per cent in Pioneer Natural Resources’ Eagle Ford asset in Texas ($1.3 billion) and 60 per cent in a venture with Houston-based Carrizo Oil & Gas ($392 million). Arvind Mahajan of KPMG says this will give RIL a leg-up in India when the country opens its shale gas assets next year.
But challenges remain. KG D6’s gas output was expected to go up from 60 million standard cubic metres a day (mscmd) to 80 mscmd this year, adding $1.1 billion (Rs 5,100 crore) to revenue annually. But Goldman Sachs feels this will not happen for the next two quarters.
RIL will also need to fund its telecom re-entry through Infotel, which bagged broadband wireless spectrum in all 22 circles for Rs 12,872 crore. But as current rules prohibit voice services on BWA, rivals with 3G may have an upper hand.
On the power-generation front, RIL’s plans have not been finalised, even though a foray was announced during its AGM. In addition, the Rs 5,220-crore Reliance Retail is still bleeding. But then RIL has Rs 1,38,025 crore in reserves and Rs 24,417 crore as profit.
B M Bansal
Chairman, Indian Oil Corporation Ltd.
Last year’s numero uno, IndianOil (IOC), has been pushed off the throne in the BW Real 500 list by Reliance Industries (RIL). IOC’s income dropped from Rs 320,517 crore to Rs 286,456 crore this fiscal, owing to a drop in international crude prices. This, however, does not bother IOC chairman B.M. Bansal. “Sales volume has increased and the company is doing fine.”
IOC, in fact, has its foot firmly on the gas pedal. It plans to enhance its refining and retail business as well as add 800 new petrol pumps. To strengthen its global presence and gain more experience in exploration, it has set aside $1 billion for foreign acquisitions, and claims to have already spoken to BP for asset acquisitions.
The company, which is already present in the entire value chain of the petroleum segment — exploration, refining, marketing, pipelines, petrochemicals and gas to global operations, may venture into shale gas. “Right now, nothing is on the table. But if we get a good option, we would surely opt for it,” says Bansal.
In India, IOC is setting up a Rs 10,000-crore gasification and re-gasification plant in Tamil Nadu. In petrochemicals, the company’s Panipat unit and Haldia Petrochemicals have raised their naphtha offtakes by 88.8 thousand metric tonnes (TMT) and 32.2 TMT, respectively. Also, work on the sulphur recovery unit of IOC’s Haldia plant is expected to be commissioned soon, after which the company will operationalise its Rs 2,869-crore hydrocracker project.
Though IOC is not the market leader in petrochemicals, it has been making significant inroads into competitors’ share. In fact, in the past four financial years, it has climbed to being next to only RIL. “RIL has a variety of products in the petrochem segment. At IOC, the situation may improve after the Panipat unit goes from 12 million metric tonnes per annum (MMTPA) to 15 MMTPA,” says an analyst.
A major development likely to take place this year is that the government may offload another 10 per cent of its stake in IOC, provided IOC adds eight independent directors to its board.