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Reliance - king of the hill - Views on News from Equitymaster
 
 
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  • Jul 7, 2000

    Reliance - king of the hill

    What started out as a small synthetic textile unit two decades ago, is today the largest synthetic textile manufacturer in the country. Reliance to continue this meteoric growth has in the last few months indicated it new growth initiatives.

    In the existing business it has consolidated its position even further. It has acquired an aggregate of 140,000 tonnes of polyester capacity in the last two years (Raymond Synthetic, J.K Corp & India Polyfibres) and is on the prowl for more. Its biggest coup will be if it is able to acquire Indian Petrochemical Corporation Ltd (IPCL). This would make it by far the undisputed king in the polymers industry.

    The basic feedstock for the petrochemical sector is Naphtha, which hitherto was being imported by Reliance for its operation. It has integrated backwards into crude refining, by setting up a 27 m tonne refinery at Jamnagar. The plant is the largest in India and has come on stream in record time and now eliminates Reliance's exposure to the international prices of naphtha.

    However, although it now has in house access to naphtha it has exposed itself to the international prices of crude. To overcome this shortcoming it has made a formed a Joint Venture (JV) with Enron and ONGC for oil exploration & production (E&P). Under the New Exploration Licensing Policy it has acquired the Panna- Mukta and Tapti fields. The project has involved a cost of Rs 29 bn.

    As per the latest reports, Reliance is also making a foray into Liquefied Natural Gas (LNG). It plans to enter into a JV with National Iranian Oil Company (NIOC) and Petronas of Malaysia for a LNG liquefication plant in Iran. The LNG will be imported and for this it is planning to set up the largest LNG facility in Jamnagar, India. The facility involves the setting up of a 7.5 m tonne per annum LNG terminal. The gas will be used as feedstock for its power plants the rest will be marketed in Maharashtra and Gujarat.

    With access to feedstock for power a logical extension would be to enter power production. Reliance has plans to set up 10,000 mega watt (MW) in the next 4-5 years. It has already set up captive power plants at Jamnagar and Patalganga.

    Moving from the old economy to the new economy. Reliance has been awarded cellular licenses in 13 circles covering seven states. It has also been awarded basic telephony license for Gujarat. As per their latest announcements they plan to enter into broad band. This project envisages an investment of more than Rs 140 bn networking 115 cities across India.

    Reliance has been amongst the very few Indian companies that have been able to cope with the challenges of liberalisation. It has moved, in Internet jargon, at net speed from being a textile manufacturer to an integrated infrastructure service provider.

     

     

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