Archive for July, 2015

RIL to invest $5 Billionin Refining and Petrochemical Operations

July 27, 2015

The leading private conglomerate Reliance Industries Limited, last week announced that it will be investing $5 billion for its refining and petrochemicals business by March, 2016. The decision came after the strong refining margins led to higher profits for the company in the first quarter.

The Mukesh Ambani-led company operates the largest refinery complex of the world. The company witnessed a 12% increase in its net profit of April-June 2015 quarter. It recorded profits of Rs. 63.18 billion. Analysts had predicted the profit to be Rs. 63.08 billion but the company exceeded expectations. Reliance Industries said that its refining margins are the highest in six years. It was $8.7 in June 2014 and a year later, it is $10.4

The company is making heavy investments to increase the capacity. Reliance Industries is hopeful that its gross refining margin or the profit it makes from each barrel of refined crude oil will be boosted once the expansion is completed by 2017. V. Srikanth, Reliance Industries’ Joint Chief Financial Officer said, “half of the value of the (benefit from) expansion should come in the Financial Year 2016-2017.”

Reliance Industries earns the maximum of its revenue from its core refining and petrochemicals ventures. Recently, the company has planned expansions in retail and telecom businesses to expedite its growth.

Reliance Industries’ telecom and retail ventures

The telecom arm of Reliance Industries, Reliance Jio Infocomm is planning to set up the largest 4G broadband network in the country. The company may initiate its test launches in August. It has planned its official commercial rollout in December 2015 with an access to around 75,000 mobile towers and through the medium of 1,000 retail stores.

“We will start extensive beta testing of our telecom infrastructure, including network across the country in the ensuing weeks to commence operations in December,” Srikanth said.

Reliance Industries re-entered the telecom industry, five years ago. The company has already made an investment over $15 billion in its telecom venture. It looks forward to providing affordable broadband services to millions in the country. India has a population of around 1.25 billion but only 25% people have Internet access.

Reliance Retail will sell 4G-enabled devices under Reliance Industries’ own brand, Reconnect. The company will adopt a twin strategy to attract more and more customers through selling its branded devices in its retail electronics chain, Reliance Digital, and the open market. The company will sell all kinds of smartphones from basic to premium in Reliance Digital stores present across the country.

Apart from the 1,000 planned Jio centers, the company may also come up with around 5 lakh connectivity outlets and a million recharge kiosks. Besides, it is also talking with leading smartphone makers like Apple, Huawei, Samsung and Xiaomi to market 4G devices and pocket routers at different costs in India.

Summary

Reliance has announced that it will be investing $5 billion in its refining and petrochemicals business by March 2016.

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Reliance Industries to Supply Fuel to Indian Railways

July 16, 2015

After an eight-year gap, private fuel companies such as Reliance Industries Ltd. will give a stiff competition to the State-owned companies in the huge Indian Railways market.

The private fuel retailers will now be supplying diesel to the Indian Railways. Earlier, the private companies failed to offer the low rates given by the State-owned companies. Hence, the 2.7 million ton market was solely captured by the three State-owned companies, since 2007. The three retailers are Indian Oil Corp. Ltd., Bharat Petroleum Corp. Ltd. and Hindustan Petroleum Corp. Ltd. Private fuel retailers were shortlisted in 2014. The companies have inked a rate contract with the Railway Board of Indian Railways. This contract is based on the lowest price offered by the companies. “Some marginal supplies have also begun from them,” a senior executive in the Railway Board in New Delhi informed.

In January, this year some media reports had informed that Reliance Industries and Essar Oil were chosen by the Indian Railways and the two may supply diesel for its locomotives. Both the companies started to supply diesel in April. Indian Railways altered the terms and conditions of the contract. Instead of the regular one-year contract, a check will be made at regular intervals like every quarter. If the company is able to further lower the price at that time, then it will have to reduce the rates to continue the contract.

Earlier ventures

After the government offered subsidies to the Public Sector Units and controlled the diesel price, the private players had quit. It is only after the prices have been de-regularized that the companies are expanding their businesses. The two companies have also charted a plan to re-initiate their fuel outlets in 2015. They had announced these plans after their annual results in April-May.

The re-opening of the fuel outlets by the private players was said to give a tough competition to the government companies. The threat to the State-owned companies will further intensify with the private companies entering the bulk Indian Railways diesel market.A report from the Oil Ministry states that India consumed around 70 million ton of diesel, in 2014. Out of this, Indian Railways consumed around 4%.

Export to Iran

The Mukesh Ambani-led company is also planning to export petrol and diesel to Iran, which it had quit, six years ago. The decision came after the recent signing of the nuclear deal.The oil products from the major refinery of Reliance Industries, located at Jamnagar of Gujarat, are at present being supplied more to the eastern markets.

An official from Reliance Industries informed, “Iran reaching a deal with western powers to curb its nuclear program in return of easing import and export restrictions, presents an opportunity to Reliance Industries.”

As the local refineries will begin, Reliance Industries anticipate fuel exports to the Middle East to reduce. Earlier, due the pressure from many countries including the US, Reliance Industries in 2009 ceased exports of gasoline to Iran.

Summary

After eight years, private companies such as Reliance will supply diesel to the Indian Railways.

RIL Completes Sale of its 49.9% Stake in US Pipeline Joint Venture

July 9, 2015

Reliance Industries completed its stake sale of 49.9 % in the US shale oil and gas pipeline joint venture to Enterprise Products Partners, which is a New York listed company. The deal was worth $1.073 billion.

A statement from Reliance Industries said, “Reliance Holding USA, Inc., a subsidiary of Reliance Industries, has announced the closing of the recently announced sale of its interest in EFS Midstream LLC to an affiliate of Enterprise Products Partners L.P.”

Agreement for selling of stakes

On 31st May, 2015, Reliance Industries and partner Pioneer Natural Resources decided to sell their stakes in EFS. Pioneer Natural Resources held the remaining 50.1% interest. The two companies agreed to sell the interest to Enterprise Product Partners L.P. for around $2.15 billion. The effective date was 1st July, 2015 and the transaction closed yesterday.

As per the agreement, Reliance Industries obtained gross cash consideration worth $574 million as a part of the initial phase of the sale. After the debt at EFS level retired and other transactions were made, the company got net proceeds of $528 million, yesterday at the closing. The last part of the payment worth $499 million will be received in cash. The company may obtain this amount in a year post the closing date.As per the agreement, Pioneer and Reliance Industries may make use of the EFS Midstream for 20-years to move condensate and gas by paying some fees.

EFS Midstream

EFS Midstream was initiated five years ago in 2010. The company is aimed to build, own and manage facilities offering gas gathering, transportation services and treating in South Texas’s Eagle Ford Shale. The company has 10 gathering plants and its pipelines are extended up to 460 miles.

The Midstream system accumulates and then segregates produced condensate from produced gas. It also works to stabilize the condensate, whenever required. Besides, it treats the gas produced from the Eagle Ford upstream joint venture that is run by Pioneer, which holds 46% stakes.

Reliance Industries’ ventures in the US

Reliance Industries holds stakes of 45% in Eagle Ford upstream joint venture while Newpek LLC holds 9% stakes. Marketers predict that the company may sell off these stakes, too.The company also holds 45% stakes in Pioneer Natural Resources Co.’s Eagle Ford Shale formation of South Texas, which it got by paying $1.3 billion.

Apart from this, Reliance Industries has other shale ventures in the US. It holds 40% interest in Chevron’s Marcellus shale acreage and 60% stake in Marcellus shale acreage of Carrizo Oil and Gas Inc. at Central and Northeast Pennsylvania.

Other stake sale of Reliance Industries

Few days ago, Reliance Industries announced that it will be selling 3.1% stakes in Network18 Media and Investments Ltd. This will be done to adhere to the rules issued by Security and Exchange Board of India (SEBI). The deal may fetch the company around $32 million. The company will be selling 32.5 million shares to comply with the norm of 25% minimum public ownership. The company had bought stakes in the media group in 2014.

Summary

Reliance has sold its 49.9% stake in a shale oil and gas pipeline joint venture to Enterprise Products Partners for$1.073 billion.

Mukesh Ambani’s RIL to invest 2.5 Lakh Crores in the Digital Space

July 2, 2015

The Chairman of Reliance Industries, Mukesh Ambani, announced that his company will be investing more than Rs. 250,000 crores in the digital space. This includes investment on its upcoming wireless broadband infrastructure and manufacturing of mobile phones.

“We at Reliance will invest over Rs. 250,000 crores across the Digital India pillars,” he said at the launch of ‘Digital India Week’being held at New Delhi.

Establishments by Reliance Industries

Mukesh Ambani-led Reliance Jio Infocomm worth $16 billion will be rolling out its telecom and broadband services by the end of this year. This will generate an employment for more than 5 lakh people. The infrastructure for all-IP next-generation, wireless broadband is being set up in all the 29 states of the country, which will be amongst the best in the world, according to Ambani.

The company is also establishing a distribution network that will consist of 1.5 lakhs small electronic retailers who will sell and service smartphones and internet devices across the country. Besides, Reliance Jio is in talks with prominent device manufacturers for making of smartphones and internet devices at a price affordable to the masses. These phones and devices will be sold in Reliance Industries’ retail stores.

Reliance Industries will also be joining hands with the central and state governments for development in the sectors of e-governance, digital healthcare, rural digital services, digital education, and making of smart cities. It will start a Jio Digital India Startup Fund that will encourage entrepreneurs in varied cities and towns. This Fund will be created with an aim of offering a platform for the youth of the country that are willing to start their digital businesses.

Views expressed by Ambani

Ambani praised the Prime Minister, Narendra Modi’s Digital India initiative. He expressed that the initiative with the use of digital technology will transform the lives of 1.2 billion Indian citizens.The world is advancing in the information age and thus digital industry will change the lives by transforming the way we learn, play and work, he said.Ambani further expressed that industry usually moves ahead of the government. But, with this initiative, the government is moving ahead of the industry.

He congratulated Union Minister, Ravi Shankar Prasad and praised the Prime Minister. He said that Modi’s leadership will unite all the sections of society and boost the strength of all Indians. He said that the unity will set an example for the entire world. He said that this partnership will create ‘Digital Society’ for ‘new India’ which we all proudly call ‘Our India.’

Ambani expressed that he is hopeful that the Digital India initiative will be highly successful as theyouth embraces technology. They have overpowered both industry and government. They desire opportunity on the basis of merit and are hungry for development. Digital India will act as a roadmap for accomplishing their aspirations.

Summary

At the launch of Digital India Week, Mukesh Ambani’s RIL will be investing more than Rs. 250,000 crores in the digital sector.