POINTS OF INTEREST
FROM RIL CHAIRMAN, MUKESH AMBANI’S SPEECH
AT THE 36TH AGM on Friday, June 18, 2010
STRATEGIC PERSPECTIVE
As and when the power plants of ADAG are ready to receive gas, we would commence supplies to them subject to Government granting allocations to these plants in the same manner as we do to all other plants to whom Government has allocated gas from the KG-D6 gas field. With this legal dispute behind us, we look forward to a harmonious and constructive relationship with ADAG.
BUSINESS AND FINANCIAL PERFORMANCE
Reliance posted a 37% increase in turnover to reach Rs. 200,400 crore. We are the first private sector company in India to cross sales of Rs.200,000 crore.
Reliance exported products to the extent of Rs. 110,176 crore, an increase of 24% over the previous year and is India’s largest exporter.
Return on capital employed for Reliance was 14 percent, after adjustments for capital work in progress and revaluation. The difficult external environment also did not deter Reliance from making capital investments to the tune of Rs. 21,943 crore.
Reliance has proposed a dividend payout of 70 percent on the post bonus share capital, amounting to Rs. 2,430 crore. With a cash and cash equivalent of Rs. 21,874 crore, Reliance is among the strongest companies financially in emerging markets.
POLYESTER
Reliance is the largest producer of polyester in the world with facilities in multiple locations in India and Malaysia.
I am pleased to inform that we are executing 1.4 million tons of Paraxylene capacity at Jamnagar.
We are also setting up -
a. an integrated 2.3 million tons of Purified Terephthalic Acid.
b. 540,000 tons of Polyethylene Terephthalate complex at Gandhar.
c. 360,000 tonns of polyester filament yarn plant at Silvassa.
These initiatives translate to the single largest capacity addition in Polyester in the history of Reliance.
PETROCHEMICALS
Reliance is unleashing a new wave of petrochemical projects, encompassing existing and new product-market domains.
The refinery provides Reliance with extremely competitive feedstock. Reliance will leverage its superior technical and project execution skills in building additional global scale capacities. Currently, due to the current economic crisis, capacity building in this sector globally is at a low. This provides Reliance with a unique opportunity to build world scale capacity at competitive capital costs.
I had announced the setting up of an off-gas cracker at Jamnagar in 2007. We are accelerating the implementation of this cracker. This off-gas cracker with over 1.5 million tons per annum of olefins capacity with matching downstream capacities will be one of the largest facilities in the world. MEG from cracker will add to our leadership position in the polyester business.
Further, we will value-add kerosene to Normal paraffin at Jamnagar to address the growth opportunity in the growing Indian detergent market.
Reliance is the largest player in the synthetic rubber business in India. We want to build on this leadership to become one of the top ten elastomer companies in the world. Reliance will create additional capacities of poly butadiene rubber at Baroda and styrene butadiene rubber at Hazira. And butyl rubber in a JV partnership with SIBUR to complete a comprehensive portfolio in the synthetic rubbers domain.
In the next five years, our total investment in all the new polyester and petrochemical manufacturing facilities will be the largest investment in this sector to be made anywhere in the world at any given point of time. This will contribute to enhanced market share and cash flows.
A combination of higher capacities, new product domains and competitive feedstock will reinforce the status of Reliance as the most profitable petrochemical producer in the world.
PETROLEUM REFINING AND MARKETING
Last year, Reliance commissioned its new 580 kbpsd refinery in a Special Economic Zone at Jamangar. With an aggregate refining capacitly of 1.24 million barrels per day, Reliance Jamangar earned the distinction of being the largest refining complex and petroleum hub in the world.
Further, in the very first year of commissioning, the refinery capacity was stretched from its design throughput of 580 kbpsd to establish capability to run at 700 kbpsd.
Reliance also earned the distinction of supplying ultra pure grades of gasoline and diesel to the highly environmentally and quality conscious markets of the USA and Europe.
Further, alkylates which are used as blendstock for making premium ultra high-purity gasoline were produced and exported from India for the first time.
Reliance also became the first refinery in India to produce and supply Low Sulfur Diesel to the growing Indian market and meet Bharat 4 specifications.
Reliance will go ahead and build one of the largest coke gasification facilities in the world.
The new petroleum refinery with superior gross margins coupled with value addition through Off gas Cracker, Paraxylene and Coke gasification will significantly enhance the profitability from the Jamnagar complex.
EXPLORATION AND PRODUCTION
Within just one year of start-up, Reliance has ramped-up production at KG-D6 and supplied about 510 billion cubic feet of natural gas to the Nation. The production level now exceeds 60 MMSCMD of natural gas and over 30,000 barrels of crude oil per day. This achievement is without parallel in deepwater gas production systems globally.
Reliance has intensified its exploration campaigns across the deepwater basins in the East Coast, with the objective of doubling the proven reserves base in the next three years.
Having made 49 oil and gas discoveries in less than a decade as an operator, the impetus is now on converting this established resource base into production. Accelerated development of discoveries in the blocks KG D6 in the Krishna-Godavari basin, NEC 25 in the Mahanadi basin, CB10 in the Cambay basin and Coal Bed Methane in Sohagpur, Madhya Pradesh are our priorities.
INTERNATIONAL OIL AND GAS
Over the years, Reliance has built an international portfolio in conventional oil & gas plays spanning over 14 blocks in 7 countries. These assets are at various stages of maturity in the E&P value chain.
The year ahead,.. We shall be drilling the first exploration wells in our assets in Kurdistan in Northern Iraq and in East Timor. In Colombia, Yemen, and Oman we shall continue our efforts through application of cutting edge technology to establish the presence of petroleum systems within our acreages.
Shale Gas is the most promising development in the energy area in North America. It is likely to overtake both conventional gas as well as liquid fuels as a source of energy within the next decade. During the year, Reliance took a significant first step by entering into a partnership with Atlas Energy to acquire a 40% interest in Atlas’s core Marcellus shale acreage position in the USA. With this, Reliance has access to approximately 343,000 acres of undeveloped land with estimated gross resource in excess of 13 trillion cubic feet of gas.
ORGANISED RETAILING
In a short span of three and a half years since the launch of its first store, the Retail business has rapidly grown to become one of the largest pan-India retailers. For the financial year ending 31st March 2010, it had revenues in excess of Rs.4500 crores, and it currently operates nearly 1150 stores, in 86 cities across 14 states. Our concerted efforts in this direction over the last three years have already made Reliance Retail the largest food retailer in the country.
During the year, even as they continued to grow at a steady pace, our “Value” formats – Reliance Fresh, Reliance Super and Reliance Mart reoriented themselves around a brand new expression – “Aapki Khushi, Hamari Khushi”.
With respect to our “Specialty” formats too, each of them has developed its own winning formula for its market segment, and is currently in the process of scaling up rapidly to become market leaders in their businesses.
Take our electronics specialty store - Reliance Digital. Reliance Digital has focussed on serving a growing need for choice and value. Similar is the case with - Reliance Trends – our apparel specialty format, Reliance Footprints – our footwear specialty format, Reliance TimeOut – our books and music format and Reliance Jewels – our Jewellery format. As these formats roll out their ambitious expansion plans, we find that our strategy of investing upfront in creating a solid back-end, especially a robust supply chain, was the correct strategy. Such a strong foundation enables these formats to pursue growth without any operational missteps.
Over the next 5 years, I can realistically foresee this business growing ten-fold from current levels, and becoming a significant value creator for Reliance in the coming years.
TRANSFORMATIONAL INITIATIVES IN POWER
Reliance and ADAG have annulled the earlier non-compete agreement and have signed a new non-compete agreement. This new agreement opens up the full range of power business for Reliance, except non-captive gas-based power plants until 2022. This paves the way for Reliance to participate in the whole value chain of the power business, spanning generation, transmission and distribution. We are ready to bring into full play our investment mobilization capabilities, as well as our superior project execution capabilities, into a sector that is crying out for transformational mega-initiatives.
We are drawing up specific plans for mega-investment in this sector with clean coal-based power generation projects, hydel projects and also in nuclear power as and when it is opened up.
We are also focused on the alternative energy domain, with priority on solar power.
Reliance successfully executed a 1 MW roof-top project at Thyagaraja Stadium for the Commonwealth Games in New Delhi. Reliance is also implementing a 5 MW solar electricity farm at a site near Jodhpur in Rajasthan. This will be the largest solar electricity farm in India
INFOCOMM:
Our company has acquired a 95% stake in Infotel Broadband Services Pvt. Ltd. to create a nation-wide network of next-generation wireless broadband services. Infotel was the only successful bidder in all of the 22 circles in the Broadband Wireless Access (“BWA”) auction conducted by DoT, Government of India. The 20 Mhz, contiguous, pan-India spectrum secured by Reliance through this stake is an extremely valuable resource. With this, Reliance can now offer fourth generation wireless Infocomm services across the nation. To build this wireless digital distribution platform, we plan to follow an asset light, but partnership-heavy approach. We will collaborate with strategic partners, such as service providers, infrastructure providers, device manufacturers and other participants in the ecosystem. This platform will be at the core of an Infocomm eco-system where content creators, application developers and global technology players can come together to deliver unparalleled customer value and experience. To seed this ecosystem, we plan to set up a Wireless Innovation Center in Mumbai.
The possibilities are limitless. This is an opportunity for our company to claim leadership in a new frontier of the knowledge economy, by creating end-to-end solutions that address the entire Infocomm value chain. I am confident that the magnitude of the opportunity, combined with our asset-light approach, will earn for you attractive returns and increase the value of your investments significantly.
ROADMAP FOR VALUE CREATION
It took three decades for Reliance to create an enterprise value of over $ 80 billion – that is, over Rs. 370,000 crore. However, I feel hopeful and confident that Reliance can accomplish value creation of a similar magnitude in less than a decade.
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