Reliance: The journey to $75 billion and beyond

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It has been 37 years since Reliance listed on the stock market. If you had invested Rs 1,000 in RIL shares when it listed in 1977-78, it would have been worth Rs 7.78 lakh, its chairman and managing director Mukesh Ambani had proudly said at its annual general meeting in 2012.

It is a mammoth of an empire, earning Rs 4.46 lakh crore ($74.3 billion; $1 = Rs 60) in annual revenues. Let us put this number into perspective. The size of India’s economy was Rs 60 lakh crore in 2013-14. Meaning, RIL earns a little less than one-tenth of India’s economy. And it is still growing, at a much faster rate than the economy.

However, the country’s largest private sector company had humble beginnings. Here’s a look at its journey so far:

The Polyester Prince

Reliance’s humbling beginning lies in polyester manufacturing. “Ambani had got into polyester manufacturing in a big way, and got huge numbers of Indians to invest in shares of his company, Reliance Industries. In India, the home of fine cotton textiles, it seemed that people couldn't get enough polyester,” author Hamish McDonald wrote in his book ‘The Polyester Prince: The Rise of Dhirubhai Ambani’. The company expanded in 1975 into the textile business. It listed in 1977, when its Initial Public Issue was oversubscribed by seven times. That itself shows how much Dhirubhai Ambani had succeeded since the company’s initiation in the 1960s. It the largest producer of polyester fibre and yarn in the world today.

Oil, oil everywhere

The senior Ambani’s ambition was not limited to polyester manufacturing. In the early 90s, Reliance expanded to get into the petro-chemical business. Today, this is RIL’s second largest business in terms of operations and revenues. It contributes around one-fifth of RIL’s revenues. Then started the oil and gas business in 1993 after significant foreign funding. It issued shares in overseas exchanges in the name of Reliance Petroleum, which has now merged with RIL. From exploration, Reliance got into the refining business – the process of cleaning raw crude oil into marketable forms. Today, this business contributes 75% or one-third of RIL’s revenues and half of its profits. It is also expected to get a significant amount of RIL’s capex of Rs 1.8 lakh crore.

From Polyester to Fashion Retail

: Remember the brand Vimal? Yep, that belongs to Reliance’s textile arm. Reliance started with textile manufacturing. Today, it has got into the business of selling textile products through its retail arm. It is the third biggest business after the oil and gas and petro-chemicals segments. It finally turned profitable in 2013. “This year, Reliance Retail has the distinction of being India's largest retailer by revenues. The business now operates 1,691 stores covering an area of 11.7 million square feet across 146 cities,” Mukesh Ambani said in his speech at the 40th Annual General Meeting this year. The company plans to expand its retail reach to over 900 cities in the country in the coming years.

Hello? Can you hear Reliance Jio?

The company first entered the telecom space in 1995-96. However, after the division of the group companies between the two brothers, telecom was demerged from Reliance Industries. It now belongs to the Reliance Dhirubhai Ambani Group (RDAG) headed by the younger brother Anil Ambani. The conglomerate got a chance to enter the sector again in 2010 when it acquired a 95% stake in Infotel Broadband Services Ltd. This company -- now named Reliance Jio Infocomm – belongs entirely to the RIL group. It won rights to sell fourth generation (4G) spectrum across 22 circles in the country. It plans to invest over Rs 30,000 crore in the telecom business over the next two years. This will help its launch of the 4G services in 2015. Remember, this is over and above the Rs 40,000 crore already invested in the segment.

The number game

: What good is analysing a company without indulging in some numbers. With Reliance, the numbers are always big. For example, the company accounts for 14% of India’s exports. The company additionally plans to invest Rs 1.8 lakh crore in its businesses over a period of three years. This is one third of the amount it invested in the last 37 years – Rs 2.4 lakh crore. The three-year investment plan could alone fund two more missions to Mars like the Mangalyaan, which cost a paltry Rs 650 crore. Heck, it exceeds the total amount FIIs have invested in the Indian debt market in 2014. That amount could fund half of India’s trade deficit. Put together, imagine how much the Rs 4.2 lakh crore of invested amount could purchase in the country! It could almost fund the entire government’s expenditure.

What next?

As of now, Reliance is concentrating on expanding its existing business, rather than getting into new ones. “In the first 30 years, Reliance built three globally competitive businesses – petrochemicals, refining and marketing and oil and gas in India,” Mukesh Ambani said in his AGM speech. “We are currently at the mid-point of the largest investment programme in Reliance's history. The next two years, 2014-15 and 2015-16, will see us focussed on executing and progressively bringing these projects on-stream in petrochemicals, refining, retail and telecom. The year 2016-17 will be the first full year in which the complete benefits of all these investments will be available to our shareholders, consumers and the society….The next three years are transformational in RIL's journey. By the time we finish four decades since our first public offering we will again be a radically different company.”

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