Reviving paused projects: RIL’s CMD Mukesh Ambani outlined the
company’s future thrust areas in his annual address to shareholders at
the AGM. With the successful completion of refinery expansion and
KGD6 development, RIL plans to refocus on earlier announced
initiatives (petchem, retail) which had been on the back burner over
last two years.
Petchem expansion back on the agenda: Initially announced in 2007,
the project envisages using cheaper refinery off-gases as feedstock for
a 2mMTPA olefin capacity with downstream linkages. RIL also
revived plans for building a synthetic rubber plant (750ktpa capacity
mooted in 2005). The speech also talked of overseas acquisitions being
an option to achieve world class scales in the business.
Services/Retail initiative: RIL had slowed investment in the retail
business over the last year. The CMD reiterated management’s
commitment to invest in and grow this business as part of a broader
thrust to increase service offerings.
E&P - Accelerated efforts on exploration: RIL had been utilizing its
drilling resources for the development of KGD6 resulting in slower
exploration efforts. RIL is working on a development plan for the
KGD6 satellite fields and will accelerate exploration efforts.
Renewable energy, rural initiatives: RIL plans to invest in pilot
projects in bio-diesel, solar energy. In our view, RIL’s rural initiative
will be aimed at strengthening the back-end for the retail operation.
Looking to use the downturn…Given its strong cash flow outlook
and balance sheet strength, RIL is looking to add capacities using the
economic-slowdown-induced slackness in the construction chain (new
capacities) and lower asset valuation (inorganic opportunities). Clarity
on capex and timelines for the organic growth projects should emerge
over the next few quarters.
Source: JP Morgan Report
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