Archive for January, 2015

Reliance Industries Raises $1 Billion through Bond Sale

January 28, 2015

Mukesh Ambani-led Reliance Industries Ltd. (RIL) raised $1 billion through a dollar bond issue. It will be using the amount to meet capital expenditure.

Investment Process

The process took a period exceeding a year and got investors from different places like New York, London, Singapore and Hong Kong for the first sale of bonds. The coupon bonds come with a duration of 10 years and have been fixed at an interest rate of 4.125%. This rate is 2.4% higher than the benchmark 10-year US treasury bonds.

A statement from the company stated that, “The notes were subscribed over 4.5 times across 272 accounts.” It also stated that it has got investors from fixed-income funds as well as sovereign funds and that the notes are geographically distributed as 44% in the US, 31% in Asia and 25% in Europe.

Some of the world’s most reputable banks like Bank of America, Barclays Plc., Citibank NA, Deutsche Bank AG, Hong Kong and Shanghai Banking Corp. Ltd., JPMorgan Chase and Co., Merrill Lynch and Standard Chartered Plc. feature amongst the investors.

Analysts’ View

Dhaval Joshi, an analyst from brokerage firm, Emkay Global Financial Services Ltd, expressed that Reliance’s growing debt is not concerning as its program of capital spending for refining and petrochemicals is likely to end in 2016.

Another analyst felt that the current rise in foreign debt is a good step as interest rates are low. He said that the maximum interest rate on Reliance’s present debt will be around 6-7%, which the organization can easily pay off with the returns it will receive from treasury investments.

Predictions from S&P

Standard and Poor’s (S&P) gave RIL a rating of BBB+ in the longterm;this is higher than the BBB- rating given for the Indian sovereign.

A release of S&P stated that as most of RIL’s projects in refining and petrochemicals are expected to end by March 2016, the profits of the company will soar in FY16-17.It is also hopeful that the debt-to-earnings ratio of the company will be twice more than that in fiscal 2014; will reach its peak in fiscal 2016 and will again return to the twice rate by fiscal 2018.

Reliance’s Performance in 2014

Last week’s results showed that RIL’s consolidated net profit had dropped by 4.5% – its first drop in 27 months – due to lower crude oil prices. It turned out to be Rs.5,256 crores from Rs. 5,502 the previous year.

Reliance had an outstanding debt of Rs.1.5 trillion at the end of 2014 as againstRs.1.38 trillion at the end of FY13-14. Its other income increased to Rs.2,340 crores from Rs.2, 076crores in a year.

2014 has set a record for issuance of foreign bonds outside of India. Bloomberg data stated that $18 billion dollars were raised through foreign currency bonds alone in the previous year.

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RIL Reopens Fuel Stations after Deregulation in Diesel Rates

January 20, 2015

Reliance Industries (RIL) has begun the year on a positive note with the reopening of their fuel stations. One-fifth of its 1,400 fuel stations have been commissioned after the deregulation in diesel prices. The Union Government had announced decontrolled diesel prices in October last year,thus encouraging private enterprises to re-enter the market.

By 2006, approximately 17% for diesel and 10% for petrol of the domestic retail market was dominated by RIL and Essar Oil Ltd, the only other private refiner in India. However the subsidization of sales by firms run by the state majorly affected fuel sales by private firms.

In an investor presentation made after announcing its third-quarter earnings, RIL announced that 230 petrol pump outlets were already commissioned and that they plan to commission the entire network within a year.

Deregulation of Fuel Prices

In June 2010, the government deregulated petrol prices in a bid to cut down fuel subsidies. This resulted in Essar regaining entry into the retailing arena and selling just petrol through a majority of its 1,400 outlets.

The deregulation of diesel, the most heavily consumed fuel in India, in 2014 led to private retailers entering the market once again.

Plan of Action

RIL had achieved a market share of 14.3% in diesel and 7.2% in petrol in 2006 and the target is to replicate the same performance levels. The company will also launch aggressive consumer schemes to quickly ramp up of volumes.

Building on its motto of “Right Quantity and Quality of fuel at the Right Price”, the company will employ superior technology that delivers unmatched customer value across the network.

In 2006, the Mukesh Ambani-run RIL owned just 4% of the total petrol stations that existed in the country.Since then the network of petrol stations has been augmented to 51,870 by State-run retailers.

Several company-owned fuel pumps have already commenced operations. 150 dealer-operated pumps owned by either dealers or RIL itself are expected to re-open in the next stage.

RIL’s Fleet Management

The company will also re-startits fleet management program, in which where large fleet operators will be supplied smart cards that allow their drivers to buy fuel without cash payment. These deliveries will be monitored online to avoid pilferage or theft.

The Fleet management program will help customers with fleet control, cash flow management, cashless transactions and information. In addition to the fleet management program, RIL will soon launch customized loyalty programs for different customer segments.

RIL further added that an aggressive automated instant reward scheme would be introduced to gain a competitive edge.Currently, 900 retail outlets are owned by the company and are part of RIL’s network while dealers own the rest.

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Reliance fixed its 2015 Diesel and Jet Fuel Term Contracts at Lower Premiums

January 13, 2015

Reliance Industries Ltd, India’s privately owned refiner,has finalized its term contracts for diesel and jet fuel cargoes loading over January-December 2015. The renewed term contract with its buyers is at lower premiums than those in the previous year. This information was confirmed by traders. The premiums have been lowered because there is more supply coming on the stream this year in the Middle East.

The new premium rates

The firm has agreed to sell 500 ppm sulfur gasoil contracts at a premium of about $1.30 a barrel above the Middle East quotes. This is 42% to 48% lower than the premiums of $2.25 to $2.50 a barrel that was negotiated for last year. It finalized the 2015 term to the Mean of Platts Arab Gulf (MOPAG) Gasoil assessment, Free On Board (FOB) basis.

Reliance Industries will also sell the 10 ppm sulfur diesel at a premium around $2 a barrel more thantheMiddle East quotes. This is below the levels it achieved for 2014 term contracts which were $2.50 to $3. This has been fixed to MOPAG Gasoil assessment, as well. Reliance wanted to achieve this rate, last year only.

For jet fuel, Reliance fixed its 2015 term at a premium of $1.85 t0 $1.90a barrel to Middle East quotes. This is said to be fixed to MOPAG jet/kerosene assessment, FOB basis. This is again lower than the $2 a barrel that it had negotiated last year.

The reasons behind the change

The lower premiums have resulted from the additional supplies of ultra-low sulfur diesel. This is expected to emerge soon from the Middle East, once commercial production of 400,000 barrels per dayfromYasref refinery in Saudi Arabia as well as Abu Dhabi National Oil Company’s (ADNOC) expanded Ruwais Refinery are initiated.

In addition to this, India has lost a key consumer outlet for 500 ppm gasoil as East Africa switched its import specifications from 500 ppm to 50 ppm sulfur gasoil from January 2015.

A Singapore based trader expressed, “I guess Reliance Industries want to capture the market first, because it seems to be a very trying year for Reliance with more refiners producing 10 ppm grade in the Middle East.”

Reliance’s refinery

Reliance Industries’ refinery has the potential to export 1 million-1.5 million mt/month of gasoil, depending on domestic consumption. It has a nameplate capacity of 1.24 million barrel per day at its Jamnagar complex in Gujarat. The Jamnagar Manufacturing Division, located near Jamnagar, comprises of a petroleum refinery and associated petrochemical plants. The refinery is equipped to refine various types of crude oil and manufactures various grades of fuel. It was created in a record time of less than three years and will always remain a special experience for Reliance.

Reliance’s new refinery in the Special Economic Zone (SEZ) at Jamnagar is the world’s sixth largest and has a Nelson Complexity Index of 14.0. This makes it the largest and most complex refinery, globally. The refinery has a capacity of processing 580,000 barrels of crude oil per stream day (BPSD).

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Reliance Foundation, a Major Contributor in developing Healthcare in India

January 6, 2015

Due to rising costs of healthcare, an ever-increasing number of people are deprived of getting the help they need. Affordable healthcare is the need of the hour especially for vulnerable sections of society. Reliance Foundation works rigorously to make quality healthcare easily available to them.

Reliance Foundation’s healthcare division has the vision of “Health for All”. It organizes many health centers, mobile medical clinics, emergency ambulance services, health awareness, diagnostic and preventive camps.

Health Outreach Program

Reliance Foundation launched a Health Outreach Program to offer help to vulnerable sections of society. Through this program, it seeks to reduce economic burden and create awareness on common health problems to effectively encourage health-seeking behavior.

The Foundation identifies and enrolls needy individuals for preventive and primary healthcare.3,87,000 people have been enrolled and provided family health cards to facilitate easy utilization of the Foundation’s services. Its medical units use latest technology, including Cloud-based software, to store patient information.

Menstrual Hygiene Program

Through its Menstrual Hygiene Program launched on International Women’s Day (March 08, 2013) at Balasinor, near Ahmedabad, Reliance Foundation distributed low-cost sanitary napkins branded Meeta. It also offered advice on menstrual hygiene to women. The sanitary napkins currently reach out to 500,000 women in more than 850 villages in Gujarat.

Drishti Program

The Foundation’s Drishti Program has supported more than 13,000 cornea transplants and supports the visually impaired in association with the National Association for the Blind (NAB). It provides correct advice and proper treatment to the people. It has also launched a registered international Braille Hindi newspaper and a Hindi Braille calendar. Besides, it conducts campaigns such as Reliance Drishti Essay Competition and Reliance Drishti Art Competition to promote eye donation.

Sir H.N. Reliance Foundation Hospital and Research Centre

The newly set up hospital, Sir H.N. Reliance Foundation Hospital and Research Centre, situated in Mumbai, provides world-class healthcare facilities. The technologically advanced institution aims to provide quality with affordability with its motto, “Respect for Life”.

Other programs

Besides these, other programs addressing maternal mortality and providing support to patients suffering from chronic ailments like AIDS and TB are conducted by the Foundation. The Reliance HIV and TB Control Centre (a NACO-Designated ART Centre) and the 28-bed Community Care Centre & Reliance AIDS Care Hospital at Hazira has offered consultation services to more than 100,000 patients. These health initiatives have touched the lives of more than 2.9 million people in India.

Reliance Foundation

The Reliance Foundation commenced in 2010 to endeavor towards sustainable growth in India. It strives to provide basic needs and develop the weaker sections of the country. The five core pillars of the foundation are Rural Transformation, Education, Health, Urban Renewal and Arts, Culture and Heritage.The Foundation has been a leader in transforming lives of the marginalized sections in the country. It has made significant contributions in the health sector.

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