ABOUT THIS COMPANY

ABOUT THIS COMPANY

Reliance Industries Limited (RIL) is the flagship company of the Reliance Group. The group controlled by Mukesh Ambani is the largest private sector enterprise in India and is ranked at 269 among Fortune 500 companies. It was also ranked 19th among the World's 25 Most Innovative Companies, a list compiled by Business Week and Boston Consulting Group.

RIL and its subsidiaries generate revenues equivalent to three percent of India's GDP and has a market capitalisation of $125 billion. Exploration and production of oil and gas, petroleum refining and marketing and petrochemicals (polyester, fibre intermediates, plastics and chemicals) are the groups' core business activities. Apart from that the group also has significant operations in the retail, infrastructure development, and industrial finance.

Seeds of growth

The Reliance group was founded by the Late Dhirjlal Hirachand Ambani, also known as Dhirubhai Ambani. By working in trivial jobs abroad, he saved enough money to start Reliance Commercial Corporation in Mumbai in 1958 - to import polyester yarn and export Indian spices. He started the first production unit of polyester fibre in Naroda (near Ahemadabad) in 1966 and began concentrating on building his own brand and empire of Reliance.

It was the Reliance Group, which bought in the equity cult to India in 1977. It was a historic IPO that garnered a record $1.8 million. In 1982, the company started producing raw materials needed for its own production units (referred as backward vertical integration), which ultimately led them to get into production of petrochemical products. Reliance forayed into oil exploration and refining business by setting up Reliance Refineries Ltd (RRL) at Jamnagar, Gujarat in 1991 (operations commenced in 1999). In 1993, RRL was rechristened as Reliance Petroleum Ltd (RPL) and went public in India and overseas capital market simultaneously (Luxembourg Stock Exchange).

The divide

The fate of the group took a significant turn when Dhirubhai passed away in 2002, leaving his sons, Mukesh and Anil at the helm. After his death, RPL merged with RIL making it the third largest organisation in India. It was also the same year in which RIL acquired state-owned Indian Petrochemichals Corporation Limited (IPCL) for a sum of Rs 2,638 crores giving a boost to its petrochemicals' business. With Mukesh's expertise in finance and Anil's efficiency in setting up new projects, the Reliance Group was able to diversify into telecom and capital finance. However, personal differences between the two brothers forced the division of the group into two equal components. Mukesh Ambani got the company's petroleum, petrochemical, and textiles operations, whereas Anil Ambani got the control over Reliance Energy and Reliance Capital and Reliance Communications. Post demerger Mukesh Ambani controlled companies were bought under the umbrella of one single entity known as RIL.

The growth chart

In 2008, RIL became the first Indian private sector company to post cash profit of Rs. 25,205 crore. With turnover of Rs. 1, 39,269 crore and a net profit of Rs. 15,261 crore, and despite the market lump, RIL still remains one of the most attractive investment option for retail as well as institutional investors.

Oil, gas, textile

RIL exploration and production (E&P) division has been a consistent success. In 2002, the company made a significant discovery of gas reserves in Krishna-Godavari (KG) basin situated near Bay of Bengal. During the same year, RIL also acquired five oil blocks situated in the Gujarat-Kutch basin. It also holds a 30 percent stake in Panna-Mukta and Tapti oil and gas fields near Mumbai's offshore. According to an informal agreement formed in 2005, British Gas and Oil and Natural Gas Corporation (ONGC) are also partners in these gas fields.

The other significant interest of RIL, the refining business, comes under RPL (Reliance Petroleum Limited). To address the growing demand for energy, RPL in 2006, began setting up a new export-oriented refinery near its existing Jamnagar refinery, which will become operational by the end of 2008. This venture will boost the refining capacity of RPL to 1.24 million barrels per day from the existing 0.66 million barrels.

Crude oil refinement gives petrochemicals' as its by-product -- this too forms a significant part of RIL's business activities. The Hazira refinery situated at Surat is instrumental in producing most of RIL's petrochemical products.

Before RIL forayed into E&P and petrochemicals sectors, its core business was textiles, which even to this day, provides the company's bread and butter. RIL is the largest polyester yarn and fibre producer globally and amongst the top ten petrochemical product producers in world. Recron (polymers) and Vimal (textile) are some of the major brands of RIL. Latest reports suggest that the group is planning an investment of Rs. 600 crore into the organised textile sector to spruce up its production capacity. RIL has also earmarked Rs. 25,000 crore to be invested in its apparel business over a period of five years (2006-11).

Retailing the way ahead

RRL has the following brands under its kitty: Reliance Mart (hypermarket), Reliance Super (mini hypermarket), Reliance Fresh (food & grocery- convenience), Reliance Digital (durables), Reliance Trendz (apparel), Reliance Footprint (footwear), Reliance Wellness (health), Reliance Jewels (jewellery), Reliance TimeOut (books & leisure), and i store (Apple products). The company also has 590 Reliance Fresh stores in 57 cities, spanning 13 states, and over 3.5 million square feet of trading space.

RIL has inked deals with established retailers like Marks and Spencers (UK) and Europe's HAL Holding NV for introducing multiple format stores. New formats in optics and office products have been proposed. This expansion will supposedly lead to generation on nearly one million jobs in the Indian retail sector.

Troubled waters

In April 2008, RIL stopped replenishing its 1,432 petroleum retail outlets. The reason was given as rising global oil prices and the dominance of state-owned firms that receive assistance from government in the form of subsidies. RIL has offered to sell the franchises to its retail outlet owners, but to no avail. The owners are unwilling as the price offered is much lower than the prevailing market price.

Also RIL's foray into retail via its subsidiary Reliance Retail Limited (RRL) has not been without hitches. When RRL rolled out its Reliance Fresh stores across the country, they were met with fierce opposition from small vendors. This forced RRL to rework its expansion strategy - the company decided to abort plans in states like UP and Bihar.

Zooming ahead

In 2007, RIL increased its leverage in the East African market by acquiring Gulf Africa Petroleum Corporation (GAPCO) for an undisclosed amount. In order to strengthen its position in the petrochemicals market, in 2002, RIL acquired Glycol Division of SM Dyechem Ltd. (SMDL) from Industrial Development Bank of India (IDBI). On May 19, 2008, the company entered into a one billion dollar collaboration with Vornado Realty Trust (US). This was done to set up a real estate fund for creating mega malls and highway shopping centers across India. This deal also marks RIL's foray into real estate and hospitality sector. It puts Mukesh Ambani in direct competition with his brother, Anil, who already owns a chain of multiplexes called Adlabs Cinemas.