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The Petro Saga... - Views on News from Equitymaster
 
 
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  • Apr 15, 1999

    The Petro Saga...

    Background

    • Reliance, an integrated conglomerate is one of India's largest private sector companies. Reliance ranks as one of the highest among Indian private sector corporates in terms of sales, profits, assets and market capitalisation.
    • Since its IPO in 1977, Reliance has grown from a small textile trading company into a world size integrated petrochemical manufacturing company. It has completely integrated backwards at every stage of the petrochemical grid, right from the cracking of naphtha to manufacturing finished products.
    • Reliance's activities encompass polyester, polymers, chemicals and branded textiles. Reliance's new ventures are in core infrastructure sectors as power, oil and gas and telecoms.
    • Reliance is a market leader in most of the product segments that it operates in.
    • Reliance's sheer size is its primary competitive advantage. It enjoys significant advantage over its competitors due to backward integration, which allows it flexibility over costs and manufacturing.Reliance dominates the domestic market and acts as a leader in determining local prices.
    • The company has a number of unique credits to its name which include being the first company to issue GDRs and raise foreign debt through 100 year bonds. The company has so far raised over US$ 1.5 bn in foreign debt.

    Products

    • Reliance is the 6th largest producer of PFY in the world, with a total capacity of 220,000 tpa. Reliance enjoys a 33% market share in this product segment. During FY98, Reliance operated at near 100% capacity utilisation to produce 217,000 tpa of PFY which represents a rise of 32% over FY97.
    • Reliance is the 5th largest producer of PSF in the world with a capacity of 270,000 tpa. Reliance commands 54% domestic market share in this product. During FY98, Reliance manufactured 232,000 tonnes of PSF.
    • During FY98, Reliance commissioned a 30,000 tpa plant top manufacture polyester fibre fill with DuPont technology. It also commissioned an 80,000 tpa bottle grade PET chip plant at its Hazira manufacturing unit.
    • Reliance is India's largest manufacturer of PTA. It boasts of a capacity of close to 1 m tpa of PTA which places it amongst the top 5 manufacturers of this product world wide.Reliance captively consumes about 45% of its produce of PTA for the manufacture of polyester yarn and fibre. Its market share in this product is close to 100%.
    • During FY98, Reliance became the 10th largest producer of MEG in the world, with toal MEG capacity rising to 340,000 tpa. The company enjoys 78% market share of this product.
    • Reliance's total capacity of 400,000 tpa of PE makes it the 10th largest swing manufacturing PE capacity in the world. The swing capacity enables Reliance to manufacture HDPE or LLDPE, switching to either in response to changes in demand. Market share of Reliance in this product segment is 60%.
    • Reliance produced 375,000 tonnes of PP in FY98 which corresponds to 71% market share. Its new 400,000 tpa PP facility at Jamnagar will place it among the top 5 producers of PP in the world.
    • Reliance has also set up the world's largest grassroot multi-feed cracker at Hazira, Gujarat. The cracker has a capacity of 750,000 tpa. During FY98 - the first complete year of operations, the cracker produced 626,000 tonnes of ethylene and 309,000 tonnes of propylene representing 89% capacity utilisation. In addition to ethylene and propylene, the cracker also produced aromatics like benzene, toulene, mix xylene and carbon black feed stock.
    • The chemicals manufactured by Reliance include LAB, paraffins, ethylene oxide and tri ethylene glycol.
    • Reliance also India's largest systhetic textile manufacturer. The products from its textiles division are sold under the brand name of 'Vimal' and 'Harmony'
    Other businesses
    • Reliance has invested in the oil and gas business through an unincorporated JV with Enron and ONGC to develop the Panna, Mukta and Tapti oil field.The toal capital expenditure incurred by the consortium till March 1998 was Rs 20 bn.
    • It has also invested in Reliance Petroleum, a seperately listed company, to set up a 27 m tpa grassroot refinery at Jamnagar.
    • Reliance has envisaged an investment of US$ 1.35 bn in 3 power projects over the coming years. The current status of power projects being promoted by the Reliance group is as follows:

    • Patalganga: 410 MW
      Bawana: 421 MW
      Jamnagar: 500 MW.
      Besdies meeting captive power requirements, these plants will also supply power to the State Electricity Grid under negotiated power purchase agreements.
    • Reliance has also promoted Reliance Telecom which operates cellular services in seven circles and basic fixed line services in Gujarat.
    Future
    • Going forward, Reliance is further consolidating its position in the industry. It has also marked its entry into core infrastructure sectors such as oil and gas, power and telecoms through joint ventures. 
    • Reliance is setting up India's largest petrochemical complex at Jamnagar, Gujarat at a cost of Rs 55 bn (US$ 1.3 bn). The project involves setting up capacities of 1.4 m tpa of paraxylene and 600,000 tpa of PP. 95% of the total capex has already been committed to this project, which is estimated to commence production by FY2000. About 50% of the produce from this complex will be captively consumed.
    • It is also setting up India's largest (and the world's seventh largest) grassroot refinery at Jamnagar with a capacity of 27 m tpa (constituting 25% of current domestic capacity). The US$ 6 bn project is completely integrated with refinery, petrochemicals, power plants, ports and related infrastructure. About 25-30% of the refinery's output will be captively consumed by group companies.

     

     

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