Setting its sight on a number of new businesses and expansion of existing ones, Mukesh Ambani-led Reliance Industries group may invest more than Rs 1.5 lakh crore over the next five years.
The group is sitting on a huge cash pile of over Rs 42,000 crore that has nearly doubled in one year, and further money influx is expected in the next few months, while it might raise further funds from the market, mostly through overseas bonds and partly through project equity, sources said.
There might be major investments, totalling nearly Rs 1 lakh crore, in the group’s core businesses of petrochemicals and energy exploration and production over the next five years, they added. Besides, business initiatives in telecom, power and financial services sectors would also witness investments worth at least Rs 50,000 crore in the next few years.
The group is working on various business expansion strategies for different segments and a consolidated view of these initiatives could be announced by group chief Ambani at RIL’s Annual General Meeting on June 3.
In last year’s AGM on June 18, 2010, Ambani had said he was aiming to double the group’s enterprise value in less than a decade, from an estimated $80 billion (Rs 3,70,000 crore) at that time.
RIL’s cash balance stood at a record high level of Rs 42,393 crore at the end of the last financial year ended March 31, 2011, as against Rs 21,874 crore a year ago. Besides, its debt-to-equity ratio is very low at 0.17 (meaning Rs 17 debt for every Rs 100 equity capital), which could allow it to raise significant debts whenever needed.
RIL raised $1.5 billion dollars through overseas bonds last year at very competitive rates. RIL’s revenue rose by 29 per cent in the financial year to Rs 258,651 crore, while its net profit increased by 25 per cent to Rs 20,286 crore.
The group would look at both organic and inorganic growth opportunities in various businesses.In a financial presentation after its full-year results last week, the company said it was “uniquely positioned to pursue organic and inorganic growth opportunities to meet its growth aspirations.”
It also said it had a “investment programme of over $10 billion to cater to domestic market” in petrochemicals business. Earlier at an investor conference in February, RIL had projected investment totalling $25-30 billion (Rs 1.1 lakh crore-1.35 lakh crore) for the next five years in its various businesses.
RIL’s main businesses in the next 5-10 years would include petrochemicals, refining, E&P, retail, telecom, power and financial services.
The earlier estimate of $25-30 billion did not include power and financial services business, sources said. As per the capex (capital expenditure) investment plan proposed in February, RIL would invest $10-12 billion in petrochemicals, while spending another $10 billion on exploration and development of (oil and gas) discoveries already made in shale gas in India and the US.
Besides, RIL would invest $4.5-4.7 billion (over Rs 20,000 crore) in telecom over the next five years. RIL has already spent $2.8 billion on acquiring 4G licences and spectrum, which it got last year through acquisition of Infotel Broadband Services.
“Our committed investments in core business and new initiatives are expected to result in sustained earnings growth,” Ambani had said last week. RIL is working on some significant initiatives for the financial services business, especially those where it can utilise its expertise and presence in sectors like energy and retail, as also its proposed telecom and power ventures.
In telecom space also, RIL is planning to offer an array of next-generation broadband services. For both telecom and financial services businesses, the group is looking to forge numerous partnerships with an aim for a large-scale presence among both corporate and individual customers.
