After Posting a Profit Rise, RIL Plans to Invest $9 Billion

The world’s biggest refinery, operated by Reliance Industries Limited (RIL) recently reported a rise in profits that exceeded its forecasts. The company reported a 1.7% rise in net profit for its fiscal quarter ending September 30. The company reported a stand-alone profit of INR57.42 billion. This is excluding RIL’s interests in retail and other small segments. This beat the average forecast of INR56.34 billion that was polled by analysts.

The company’s retail business posted its first annual profit in the last fiscal year. After 6 years of making losses, the revenue from this business rose 20% in the quarter when compared to performances a year ago. RIL is optimistic about this business and expects it to grow by 25% to 30% annually. They also believe that e-commerce will be an integral part of its strategy in the future. Co-CFO of RIL, V Srikanth said,“There are some internal discussions that are happening. E-commerce will clearly be a part of the retail strategy.”

Finally, the upstream oil business of RIL posted its second consecutive quarter of double-digit revenue growth. This comes after 3 years of declines that are now boosted by a 34% increase in revenue from its shale gas operations in the United States.

RIL’s Investment Plans

Under the stewardship of Chairman and Managing Director, Mukesh Ambani, RIL has been expanding beyond its core refining and petrochemicals business by investing in consumer-focused sectors such as telecommunications and retail. Owing to stronger refining margins, the company further announced that it would invest up to $9 billion over the next quarters in various business categories.

In its refining and petrochemicals business, the gross refining or profit margin from each barrel of crude oil refined was $8.30 in the quarter. Compared to the same time last year, the margins have gone up by $0.60 per barrel.

Mukesh Ambani said, “Renewed optimism in the domestic economy augurs well for business and consumer confidence, particularly against the backdrop of continuing concerns on global economic growth.”

Furthermore, the Co- CFO at RIL, AlokAgarwal said, “We have spent 450 billion rupees in the first six months, what we can make out is that we’ll spend probably between 500 billion to 550 billion rupees ($8.2-$9 billion) in the next six months.”

Clearing up the Roadblocks

The company is also hopeful towards a favorable decision on the price of natural gas by next month. RIL along with it partners in the Krishna Godavari (KG) D6 block off the east coast of India are in mediation with the government over the hike of gas prices that have already been delayed 3 times.

Agarwal adds, “We are taking what the government is saying very seriously that they will take a decision on gas pricing by Nov. 15.”

RIL continues to be persistent in its domestic oil and gas output as well as in calming investor concerns about the $11.7 billion investment towards 4G telecom services that are yet to be launched. The company has been working in full gear to roll out telecom services early next year.

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