PHASES THROUGH WHICH RIL PASSED -
September 13th, 2010
PHASES THROUGH WHICH RIL PASSED
Dhirubhai Ambani, founder of RIL, started fabric manufacturing operations in 1966. In 1967 it achieved a turnover of Rs. 9 mn and a profit of Rs. 1.3 mn. Its turnover and profit shot up from Rs. 49.1 mn and Rs. 3.9 mn in 1970 to Rs. 689.8 mn and Rs. 43.3 mn respectively in 1977 when decision was taken to make the company public.
In 1980, Reliance fabrics were available all over India through over 20 retail outlets, over a 1000 franchised outlets and over 20000 regular retail stores. By 1980 turnover jumped to Rs. 2.1 bn.
1986 – A major setback
In February 1986, Dhirubhai suffered a paralytic stoke. The critics contended that RIL’s growth were consequences of the enormous political clout RIL wielded. In 1986, following the consequent change in the Indian Government after the assassination of Indira Gandhi, the company found itself caught in a strom of controversies.
In June 1986, the government banned conversion of the non-convertible portion of debentures in to equity shares.
THE INDIAN EXPRESS alleged that state owned banks provided huge sum of money to investment companies owned by Ambanis in violation of prevailing lending norms. Enabling company to acquire large quantities of debentures. Following these, RIL’s share prices crashed. The year ended with RIL’s profits nose diving from Rs. 713 mn the year before to only Rs. 141 mn.
However another round of changes in the government began to tide the company’s fortune from early 1987. The company was permitted to prepone the conversion of the debentures into equity shares, which resulted in an saving of about Rs. 330 mn in interest cost. RIL declared a hefty profit of Rs. 800 mn in the next accounting year. It also changed the method of charging depreciation, which resulted in net profit to rise by Rs. 245 mn.
Reliance has invested over Rs. 100 bn between 1994 to 1998. 40% of this investment was earmarked for expanding the polyester fibres and fibre intermediates business that helped the company emerge as the world’s largest integrated producer of polyester. A bulk of remaining 60% was earmarked for setting up one of the India’s largest oil refineries - a logical next step in Reliance’s relentless drive for vertical integration.
The historical growth of RIL was built on a step-by-step process of backward integration from textiles and fibres to fibre intermediates and feedstocks and finally, all the way to oil refining and exploration.
The continuing capacity growth allowed the company to emerge as the lowest cost polyster producer in the world in 1994.
During this period the long-term investors in shares of Reliance Industries have earned returns of 18% per year, compounded annually, in a period when the benchmark index, the BSE Sensex, has delivered compounded returns of less than 1% per annum
During this period RIL became country's largest private sector E&P player, with over 177,000 sq. kms. of awarded exploration acreage, in 26 offshore and onshore, deep and shallow water blocks, including one in Yemen. It made significant investments in these E&P blocks over the next 2 years, to establish the presence of oil and gas reserves.
Our refinery at Jamnagar in Gujarat is the world's largest grassroots refinery, and the 5th largest refinery in the world, at any single location. Within India, it is the largest, most complex and most profitable refinery, with nearly 25% of domestic production capacity.
RIL received government approvals for setting up over 5,800 retail outlets for marketing of transportation fuels, diesel and gasoline, across the country. It tried to achieve integration of refining and marketing, deliver a complete value proposition to our customers, and enhance returns on capital employed in this business.
In petrochemicals, it became the world's second largest producer of polyester staple fibre and polyester filament yarn, and amongst the top 10 producers globally, in most of other major products. The acquisition of IPCL has further strengthened its competitiveness. It looked for opportunities, in India and abroad, to increase leadership in this business.
In the power sector, they have strengthened ownership of BSES, India's leading utility company, with interests in power generation, transmission and distribution, with a customer, base of over 5 million.
In the field of information and communications, Group company, Reliance Infocom, will usher in a digital revolution in the country, providing the full range of fixed wireline, mobile, national long distance and international long distance services, together with data, image and value added services, to customers across the country.