Anxious investors have many queries for Mukesh

Many want direction from company on its future business policy with regard to its telecom, retail ventures

Shareholders of Reliance Industries (RIL) have many questions for Mukesh Ambani, chairman and managing director, when they meet him at its 39th Annual General Meeting (AGM) tomorrow.

While many want direction from the company on business policy with regard to its telecom and retail ventures, both considered engines of growth for it, others seek answers on its sluggish oil & gas exploration and production business.

The RIL stock has halved from an all-time high of Rs 1,626 made (intra-day) on January 15, 2008, to on Wednesday’s closing figure of Rs 800.55. During these five-odd years, the S&P BSE Sensex was down about seven per cent.

“Till five years back, RIL delivered a compounded annual growth rate of a little more than 27 per cent. More than what Warren Buffett has delivered. But for the last four years, it is flat. There are no shareholder returns. I would like them to maintain the earlier high growth rates,” said an investor with RIL who is also a chartered accountant.  Ahead of its AGM, the RIL shares gained nearly three per cent in an otherwise sluggish stock market.  “Since there have many announcements on the company’s telecom initiative, I am expecting clarity on that front,” said another shareholder.

RIL plans to invest around $27 billion — $11 bn on exploration and production, $4 bn on refining, $8 bn on petrochemicals, $3 bn on infocomm and $1 bn on retailing — in the next four years. ($1 bn is about Rs 5,670  crore at on Wednesday's exchange rate.)

The company has cash and cash equivalents of around Rs 80,000 crore and has reported a net profit of Rs 20,000 crore on an annual average in the past three years. It needs much more to fund its investment plans and has been raising money through bond sales in the public debt market.

As noted, 85 per cent of this capex would be on the oil, gas and petrochemical businesses. In telecom, RIL plans to offer voice telephony and data services through a pan-India 4G (fourth-generation technology) network. “I am disappointed with RIL on the exploration and production front. I want to ask the company what benefits has it derived out of its tie-up with BP so far? Gas production from the K-G (Krishna-Godavari) Basin has been on a constant decline,” said another shareholder.

Natural gas output from the D6 block of the K-G field has dropped to a little less than 14.83 million standard cubic metres a day, the lowest level since it began production in April 2009. RIL has shut half the 18 original wells on the D1 & D3 fields in the block and a third of the six wells on the field due to high water and sand ingress.

The RIL management has proposed a dividend of Rs 9 an equity share, subject to shareholders’ approval.