Archive for May, 2015

Reliance Retail to raise 4,500 Crore for E-commerce Venture

May 26, 2015

The retail arm of Reliance Industries will soon be rolling out its e-commerce business. Reliance Retail will borrow an amount of Rs. 4,500 crores for the same. The money will be obtained by term loans and debentures. The company has taken this step to sustain the on growing competition.

Loan taken by Reliance Retail

Reliance Retail filed board resolutions, last week, with the Registrar of Companies. In this, it said that the company will obtain Rs. 2,500 crores from term loans issued from State Bank of India. The remaining Rs. 2,000 crores will be acquired from convertible debentures. The money is said to come in many tranches.

A spokesperson of the company informed, “Reliance Retail is growing rapidly and these are enabling provisions to fund a growing and profitable business.” The company will make use of its money in varied business operations. Apart from the online venture, it will also be used for setting up physical stores.

Business of Reliance Retail

In Financial Year (FY) 2013-2014, Reliance Retail emerged as the largest retailer of India. In FY 2014-2015, its revenue increased by 21% to become Rs. 17,640 crores. The profit excluding tax was Rs. 193 crores.

In its recent annual report, Reliance Industries said that it wants to enhance the customer experience by offering products both online and offline. This will provide them with abundance choice and convenience. It further said in its report that, “The opportunity is to integrate an ‘offline-online’ model, which can truly differentiate the customer experience.”

Experts said that the combined venture of Reliance Retail will help the company save a lot of money and widen their customer reach. They also predicted that Reliance Retail will succeed in its e-commerce business because of its large financial backing and present logistics infrastructure. The e-commerce venture of the retailer is part of Chairman Mukesh Ambani’s bigger plan of integrating Reliance Jio Infocomm’s telecom and 4G services with web and digital commerce. He had announced of this plan in the company’s annual general meeting conducted in 2014.

Reliance Retail closed down around 100 of its supermarkets in FY 2013–2014, so that it could largely focus on its online venture. However, its wholesale business, Reliance Market is still a key business focus. This is because it has been established with an aim to empower and assist farmers and small grocery stores.

Growing e-commerce

The e-commerce business in India has seen a boom in the recent years. The e-commerce business will further be boosted by increase in internet access, cheaper smartphones, streamlined logistics framework and payment developments from online retailers like cash on delivery and mobile wallets. The e-commerce business is expected to grow four times in the next four years to reach around $70 billion, which is approximately Rs. 4.34 lakh crores.

Future Group and the Aditya Birla Group are other companies that are making plans to launch their online ventures. To maintain a stable position in the aggressive competition, Reliance Retail will also set up a website to sell food and grocery products.

Summary

The retail arm of RIL, Reliance Retail will take loan worth Rs. 4,500 crores for its upcoming e-commerce business.


//

Reliance Industries sells Taiwan Bonds for $200 Million

May 20, 2015

Reliance Industries Limited has obtained an amount of $200 million after it sold itslong-term bonds. The bonds were sold to investors in Taiwan. Completion of such a sale makes Reliance Industries, the first company to do so.

Formosa bonds

Bonds that are issued in Taiwan and are not in the New Taiwan Dollar, are termed as Formosa bonds. The market of these bonds is fast growing as it provides funds for a longer period and may be invested with insurers in Taiwan. Reliance Industries is the first company of Asia that has captured this market.

Reliance Industries gave a notice to the exchanges yesterday. It mentioned that the company had obtained the money by issuing 20-year notes with coupon rate of 5%.

The company informed, “These notes, denominated in US dollars, have been issued primarily to Taiwanese life insurance companies and are proposed to be listed on the Taipei Exchange.” It also said that the money will be used for its ongoing capital expenditure.

The issue was managed by renowned banks, namely Deutsche Bank AG, HSBC Bank (Taiwan) Ltd. andTaipei Branch.
A banker said that many companies are tapping the Formosa bond market. It is because in this market, the issuer may make use of very long-dated bond financing and redeem it even before it is matured.

Randhir Singh, India Head of Financing at Deutsche Banksaid that, this Formosa bond is the first which is not based in India. He also said that the bond issued by Reliance Industries has the longest tenureamong any such bond issued by any Asian company.

Reliance Industries is an active foreign currency borrower. The company plans to expand its petrochemical business and roll out its 4G (fourth generation) telecom services. It is planning to expand its petrochemical business by 60% in 2 years.

Preparations for telecom venture

In this month, Reliance Industries’ subsidiary, Reliance Jio Infocomm Limited acquired $750 million from an associationof nine banks.Korea Trade Insurance Corporation (K-Sure) acted as the guarantor of this loan. Reliance Industries also took $1 billion after selling 10-year bonds, in January. Investors from Asia, Europe and US bought these bonds.

In the last three years, the company has acquired more than $10 billion from out of India borrowings. A major portion of this amount is used for setting up its telecom infrastructure.

The company is gearing up to establish a telecom network spread throughout the country. It wants to offer communication service and internet connection with high-speed. Besides, it also focuses on giving other digital services in sectors like education, entertainment, healthcare, government-citizen interface, security and financial services.

To set up the infrastructure the company has already invested more than $14 billion. It has also planned to roll out its voice services in a minimum of five cities before the end of next month. The company has a license to offer 4G services all over the country in 22 circles under the spectrum band of 2,300MHz. Besides, it has also won 20 telecom regions in spectrum bands of 800MHz and 1800MHz.

Summary

Being the first Indian company, to sell its long-term Taiwan bonds, Reliance Industries has raised $200 million.


//

Reliance Industries to triple its gas production by 2021- 2022

May 13, 2015

Reliance Industries along with its partner BP PLC has decided to boost the production from their eastern offshore KG-D6 block. The two companies will increase the production of natural gas and aims to get an output, which is around three times the current production, by 2021-2022. They expect to earn fair gas price and thus cover their exploration risk.

Meeting at PMO

Reliance Industries and BP presented in a meeting held last week at Prime Minister’s Office (PMO).Principal Secretary to Prime Minister, NripendraMisra,Finance Secretary, Rajiv Mehrishi, Member of NITI Aayog, BibekDebroy, Cabinet Secretary,Ajit Seth and Chief Economic Advisor,Arvind Subramanian attended the meeting. Some dignitaries from oil and coal ministries were also present.The meeting was conducted to check obstacles arising in exploration and analyze the companies’ gas production plans.

In this, the companies mentioned that KG-D6 block produced 11.5 million standard cubic meters per day of gas in the last quarter of Financial Year 2014 – 2015. They expect the production to reach to 30 – 35 million metric standard cubic meters per day(mmscmd) of gas in 6 to 7 years. They also informed that this increase in the production will be an outcome from R-series, MJ-1 fields, 4-satellite and other satellite fields.

The two companies along with government-owned, Oil and Natural Gas Corporation (ONGC) asked for profitable prices for natural gas to overcome their exploration risk. Companies spend millions in exploring. Moreover, they do not get any return if there is no discovery. The private operators want the State to make a plan for the changes occurring in the market prices. At present, the gas price is of USD 4.66 per million British thermal unit.The State-owned company, ONGC informed that its discoveries are not feasible at this price.

Production expected from the discoveries

Sources informed that Reliance Industries and BP are working to get an output of 13-15 mmscmd of gas for 13 years from discoveries of D-34 or R-Series inblock KG-DWN-98/3 or KG-D6. It is predicted that the discovery has around 2.2 trillion cubic feet of reserves. To produce gas from it, USD 3.18 billion is being invested.The four satellite gas discoveries are D-2, D-6, D-19 and D-22. These have 617 billion cubic feet of reserves. For eight years, this discovery mayproduce 10.36 mmscmd of gas. Hence, Reliance Industries and BP are spending around USD 1.529 billion to develop these fields.Some other satellite fields like D-29, D-30, D-31 and MJ-1 will also be developed.

Reliance Industries’ discoveries

Reliance Industries has made 19 gas discoveries, till date, along with 1 oil find in the KG-D6 block. The biggest of these were D-1 and D-3. Production in these fields began in April, 2009. In a year, the output obtained was 54 million metric cubic meters per day (mmcmd) which then became 6.16 mmscmd, last quarter. Besides, 5.07 mmcmd of associated gas is obtained from the MA oilfield that is located in the same area.

//