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Reliance Industries has said it will shut down non-profitable outlets belonging to its retail chain Reliance Retail.
In an analyst meet post the company's fourth quarter results on Friday, RIL said it has also decided to lower the capital expenditure layout for its shale gas business for FY16.
"It will be a wise decision to shut down stores which are not doing well and are a drain on the finances. All retail players operate in this manner," said a research analyst from a domestic brokerage who attended the analyst meet.
"It will be a wise decision to shut down stores which are not doing well and are a drain on the finances. All retail players operate in this manner," said a research analyst from a domestic brokerage who attended the analyst meet.
Reliance Retail is not just the largest retailer in terms of revenues, but is also the biggest in most of the categories it operates in. As on March 31, RIL operated 2,621 stores across 200 cities, with 12.5 million sq ft space and saw its profits improve over two times and revenue increase by 21%.
A senior RIL official said, “Any rationalisation for retail outlets is a continuous process. We keep evaluating our options on this front. We have done this in the past and all retail players operate in this manner.” He, however, refused to divulge details on the number of outlets RIL would be shutting down or the categories.
With 1,000 stores, Reliance Digital has become the largest consumer durables and electronics retail chain in the country. Tata-owned Croma runs 97 stores while Videocon’s durables chain, Next, owns about 800 stores. Reliance Digital Xpress Mini at more than 800 stores is now the largest mobile phone retail chain in the country. Essar-owned The Mobile Store runs over 800 stores in the country.
Reliance Retail has a clear lead when it comes to cash and carry stores. Started four years ago, Reliance operates 43 such outlets called Reliance Market stores. Set up seven years ago, US-based Walmart runs 20 stores and Germany’s Metro, which had started more than 10 years ago, operates 17 outlets.
Reliance is also the biggest in department stores. The 200 stores of Reliance Trends sell 1,50,000 garments daily, making it the largest fashion retailer in the country. Rahejas-owned Shoppers Stop runs about 75 stores while Aditya Birla owned Pantaloons has more than 100 outlets. Its footwear chain, Reliance Footprint, operates 200 stores across 100 cities.
Reliance Jio
RIL will reveal detailed plans about Reliance Jio at the company’s annual general meeting, the company told analysts.
Reliance Jio Infocomm (RJIL), a subsidiary of RIL, plans to enter into agreements with various state and local authorities to offer Wi-Fi services. It has launched trial Wi-Fi hot spots across India, the company had said while announcing results for the fourth quarter of 2014-15.
Last year, the company had announced it would launch fourth generation (4G) services in a phased manner. RJIL is setting up a pan-India network to provide 4G high-speed internet connectivity, communication services and various digital services in key domains such as education, health care, security, financial services, government-citizen interfaces and entertainment, it said.
In 2010 shortly after the non-compete pact between brothers Mukesh Ambani and Anil Ambani, was scrapped, RIL entered the telecom segment. In 2010, it acquired Broadband Wireless Access spectrum (2,300 MHz) in all 22 telecom circles of India. Subsequently, in 2014, it acquired spectrum in 1,800 MHz in 14 circles and in the auction concluded in March this year, it acquired spectrum in 800 MHz and 1,800 MHz in 13 circles. RJIL’s total spectrum holding has increased from 597.6 MHz to 751.1 MHz (including uplink and downlink), strengthening its position as the largest holder of liberalised spectrum.
Shale gas capex lowered
Once bullish on the segment, RIL has now decided to lower the capital expenditure layout for its shale gas business for FY16.
In the presentation to analysts post its fourth quarter results last week, RIL said capex guidance for FY16 in the shale gas business has been lowered by 30% to $860 million.
Overall capex for the shale gas segment for the fourth quarter stood at $234 million and the cumulative investment across all three joint ventures was at $8.1 billion.
Lower volumes, coupled with sharply lower realisation, resulted in overall revenues and EBITDA for the quarter being lower by 33% and 48%, respectively.
In the presentation, RIL said it is reducing activity levels across all shale gas joint ventures.
“Thrust is on conserving cash and retaining optionality on resources while ensuring continued growth in production and reserves," RIL said. In its Pioneer JV, six rigs will be operations in 2015, compared to 9-10 rig operation in 2014. Chevron JV will see only one rig operational. Carrizo JV will see delay in development/completion activities to 2016.
On the domestic exploration and production front, the management indicated that it is in the process of submitting declaration of commerciality (DoC) for the MJ1 field in Q1 of FY16. For its coal bed methane (CBM) segment, RIL told analysts that the phase-1 capex for CBM is at $330 million with 200 wells to be drilled and with production expected to start from Q2 of FY16.
