Reliance Industries restores salary, offers bonus in hydrocarbon arm

 

Reliance Industries is rolling back salary cuts for employees of its hydrocarbons division, and is also giving out performance bonus that had been deferred after business was hit by the lockdown.

The firm is also offering an advance 30 per cent of the variable pay from the next year’s salary to its employees, as a goodwill gesture for working during the pandemic, said two people familiar with the matter.

Reliance in April had cut the salary of employees of its hydrocarbons division by 10 per cent to 50 per cent with the firm's chairman and richest Indian Mukesh Ambani agreeing to forgo all his remuneration.

Also, the oil-to-technology conglomerate had deferred annual cash bonus and performance-linked incentives that are normally paid in the first quarter.

Sources said Reliance may have done some intra-division cash transfer to roll back the salary cuts in the hydrocarbons divisions.

An email sent to the company for comments remained unanswered. Reliance's hydrocarbon business was adversely impacted due to a reduction in demand for refined products and petrochemicals after a nationwide lockdown was imposed to curb spread of coronavirus.

While Ambani forgo his entire Rs 15 crore compensation, Reliance board of directors including executive directors, executive committee members, and senior leaders saw 30 per cent to 50 per cent of their compensation.

RIL up 3% as Abu Dhabi Investment Authority picks stake in Reliance Retail

 Shares of Reliance Industries (RIL) gained 3 per cent to Rs 2,287.50 on the BSE on Wednesday after the company said Abu Dhabi Investment Authority (ADIA) will invest Rs 5,512.50 crore into the company's subsidiary Reliance Retail Ventures (RRVL) for 1.2-per cent stake. RIL's stock had hit a record high of Rs 2,368.80, hit on September 16, 2020.

This is the seventh deal to be announced by the Mukesh Ambani-led firm in four weeks, stepping up its stake-sale process that has seen marquee investors back the firm so far. With this investment, RRVL has raised Rs 37,710 crore from leading global investors including Silver Lake, KKR, General Atlantic, Mubadala, GIC, TPG, and ADIA in less than four weeks.

Reliance Retail, a subsidiary of RRVL, operates India's largest, fastest growing and most profitable retail business serving close to 640 million footfalls across its around 12,000 stores nationwide.

“Reliance Retail has rapidly established itself as one of the leading retail businesses in India and, by leveraging both its physical and digital supply chains, is strongly positioned for further growth. This investment is consistent with our strategy of investing in market leading businesses in Asia linked to the region’s consumption-driven growth and rapid technological advancement,” said Hamad Shahwan Aldhaheri, Executive Director of the Private Equities Department at ADIA.

Meanwhile, according to a Business Standard report, RRVL is expected to divest only a small stake of 10-15 per cent in its retail holding company, the proceeds of which will be used to fund acquisitions such as the retail and wholesale business of Future Group and others. As part of its initial and ongoing fund-raising exercise, RRVL has already divested 8.48 per cent stake to a bevy of private equity funds for Rs 37,710 crore. CLICK HERE TO READ FULL REPORT

Reliance Retail vs DMart: Why UBS thinks RIL may emerge as the winner

 

Oil-to-telecom conglomerate Reliance Industries is steadily working on expanding its footprint in the retail sector. On Tuesday, Abu Dhabi Investment Authority (ADIA) became the eighth investor in Reliance Retail Ventures, agreeing to pick 1.2 per cent equity stake in the company for Rs 5,512.5 crore.

ADIA joins the league of Silver Lake, KKR, General Atlantic, Mubadala Investment Company, GIC, and TPG who have cumulatively invested Rs 37,710 crore for 8.48 per cent stake.

Mukesh Ambani-owned Reliance Industries shifted gears in August this year, when it agreed to buy Kishore Biyani-promoted Future Group as going concerns on a slump sale basis for Rs 24,713 crore. The sale would include key brands like Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory.

As Reliance Retail aggressively establishes itself, leveraging on online sales via JioMart, analysts believe incumbent players need to re-orient or scale-up their businesses, go for mergers, and cash-in on niche segment to exploit customer loyalty.

A comparative study by UBS, however, indicates that Reliance Retail is likely to emerge as the sector leader, while its closest competitor Avenue Supermarts (DMart) might fail to capitalise on the digital opportunities arising from social distancing because of Covid-19.

“We are lowering our PAT estimates for Avenue Supermarts by 36.8 per cent/13 per cent for FY21/FY22.

Our PAT estimates for Avenue are now 16.6 per cent/7.7 per cent below consensus estimates for FY21/FY22. For Reliance Retail, we raise our revenue estimates given the higher visibility of its e-commerce business ramp-up. However, we have reduced our forecast EBITDA margin given its increasing proportion of sales from the online channel,” it said in a recent report.

Reliance to sell some April-loading crude cargoes in a rare move: Report

In a rare move, Reliance Industries is seeking to sell some its April-loading crude oil cargoes from Middle East as it plans to cut crude processing after the coronavirus pandemic hit global fuel demand, sources told Reuters on Friday.

The move comes as refiners across the world are considering deeper run cuts as their plants witness heavy losses, mostly because of the measures taken by governments to prevent the virus from spreading have slashed fuel consumption.

Mukesh Ambani's Reliance has offered various grades of Middle East crude for sale in Asia's spot market, including grades such as Abu Dhabi's Murban crude and Qatar's al-Shaheen crude, the sources said.

Reliance is also seeking to sell cargoes already at sea as the government has stopped export of crude oil. By selling the crude, Reliance hopes to avoid demurrage costs especially as freight rates have risen, said a source.

The company did not respond to a request for comment.

Reliance operates the world's biggest refining complex with capacity to process 1.4 million barrels per day (bpd) of oil at Jamnagar in Gujarat. "As of now, the plan is to cut refining throughput in April because demand is not there," the source said. The company is also reportedly in talks with producers to defer some cargoes.

Reliance's two advanced refineries, situated next to each other, have the capability to process some of the toughest cheaper grades available in the market.

The refiner sells most products from the 660,000 bpd refinery that focuses on the domestic market through its own retail stations and by sale to state fuel retailers, which dominate India's fuel retail market.

India introduced a 21-day lockdown that began on Wednesday to stem the spread of coronavirus in the country, leading to a drastic fall in local fuel demand. Several refiners have cut refining processing due to the lockdown.

Reliance's other 704,000 bpd plant exports products to overseas markets, where demand is also hit as nations restrict the movement of people to prevent the virus from spreading.

 

 

(Reporting by Florence Tan in Singapore and Nidhi Verma in New Delhi; Editing by Mark Potter and Susan Fenton)

Reliance rejig of media business makes Sony merger less likely, say experts

Reliance Industries' move to consolidate its media and distribution businesses under one entity Network18 Media & Investments will create a cleaner structure and make the merger of entertainment channels with Sony less likely, experts said.

Earlier this week, the company said it will merge its TV18 Broadcast business with Network18, and maintain the cable and broadband businesses of Hathway Cable & Datacom and Den Networks, which it bought in 2018, as separate wholly-owned subsidiaries of Network18.

Network18's portfolio includes Nickelodeon, MTV, and CNBC TV18, among others.

"From RIL's perspective, this creates a cleaner structure and is easier to manage (as it reduces listed entities)," BofA Securities said in a report Friday.

In a separate report, CLSA said the rejig will make a deal with Sony for merger of entertainment channels less likely as the news broadcasting sector has a restriction of 26 per cent foreign ownership.

Between content and distribution, BofA considered distribution to be the more important component for RIL's media business as it generates higher margins and return ratios as compared to content that could be aggregated.

"The merger helps improve capital structure as the combined entity will be debt-free and has a balanced mix of subscription (53 per cent) and advertisements (47 per cent) in its revenues," it said.

From Network18 perspective, this helps reduce dependence on ads and helps especially in times of slower GDP growth.

Stating that synergies aren't much except removal of overheads, the report said NW18 channels could be included in Den/Hathway packs at lower prices.

"We consider RIL via the combined entity to emerge as one of the dominant entities in the media space and through the merged entity gives an opportunity to invest in the high growth segments," it said.

Media contributes to 2.1 per cent of RIL's EV and is not a big driver. "It, however, helps RIL improve customer stickiness with the potential to offer bundled products in the future and better analyse customer trends/segmentation," it added.

In a separate report, CLSA said the restructuring of media assets may be a precursor to Reliance Jio IPO.

RIL "is restructuring its media businesses to mainly a defunct dual holding structure of broadcast operations and merging Hathway and Den Networks," it said adding that multiple businesses are being folded into Network18, which will be the sole listed entity and will be 64 per cent owned by RIL.

"We do not see these deals as a media sector consolidation, but as a precursor to a likely IPO of Reliance Jio," CLSA said. "Reliance's 'news' (carries 26 per cent foreign ownership restriction) and 'distribution' businesses post deals housed in Network18 will likely make a subsequent deal with Sony to merge entertainment channels less likely."

Viacom US, the foreign partner of Reliance, will continue to own 49 per cent in broadcast operations via Viacom18 Media which will be a 51 per cent subsidiary of Network18.

Reliance through subsidiaries currently owns 82 per cent in Den and 80 per cent in Hathway and has spent about Rs 6,400 crore in acquiring these companies, which surprisingly have seen subscribers drop from 24 million (when acquired in end-2018) to current 15 million.

Reliance launches new road project to counter pushback against plastics

Reliance Industries, India's largest petchem player, is launching a project to use plastics in road construction, amid growing concerns over pollution in the country of 1.3 billion whose major cities are often plagued with smog and litter.

India, which uses about 14 million tonnes of plastic annually, lacks an organized system for management of plastic waste, leading to widespread littering.

Prime Minister Narendra Modi is urging India to end consumption of single-use plastics by 2022.

But Indians should focus on fighting pollution, not plastics, executives at Reliance, whose chairman is Asia's richest man Mukesh Ambani, said during a launch event on Tuesday.

The company will seek to work with India's highway authority and individual states to potentially supply a plastics-infused mix to make some of the thousands of kilometers of roads Modi wants to build to upgrade India's creaking infrastructure.

Light plastics, the type used as carry bags or snack wrappers, are typically not viable to recycle and so end up in landfills, street corners or oceans. Reliance wants to shred these plastics and mix them with bitumen, a formula the conglomerate says is cheaper and longer-lasting.

"(This) can be a game-changing project both for our environment and our roads," Vipul Shah, the COO of the petrochemicals business, said at a company petchem plant in the western state of Maharashtra.

Shah was coy on details, saying Reliance had yet to work out the financial fine print in what he stressed would be a philanthropic endeavour.

Reliance's announcement comes as campaigners such as Greta Thunberg ramp up pressure on businesses to help tackle climate change.

"It is happening internationally and now has started percolating to India too, though it's at a very early stage," said Sunil Dahiya, an analyst at the Center for Research on Energy and Clean Air.

"Corporates and industries are a big source of all kinds of pollution in India, so much more serious thoughts, policies and actions are required from them," he added.

India was home to 15 of the 20 most polluted cities in the world in 2018, according to a study by two groups monitoring air pollution. New Delhi is the world's most polluted capital, with smog causing school cancellations, flight diversions and untold health problems for its over 20 million people.

Reliance is India's answer to Exxon, AT&T, Amazon - all rolled into one

Billionaire Mukesh Ambani's Reliance Industries is India's answer to US giants Exxon, AT&T and Amazon - all rolled into one, Bernstein Research said on Tuesday.

"Reliance has disrupted the energy and telecoms industry in India and is on the cusp of doing the same to retail, fintech, and media," it said in a report adding the company has an enviable track record of innovation and execution.

For the oil-to-telecom conglomerate, energy remains core business and is expected to further expand as India is forecast to be the fastest-growing market for fuel and chemical products over the next decade, it said adding the company's partnership with BP of the UK and Saudi Aramco will support this.

Reliance owns the world's largest single-site oil refining complex and has multiple petrochemical plants. Three years back it forayed into telecom business and has reached 34 per cent share of market revenue.

"Based on the current net add run-rates it will likely reach 44 per cent share by the end of the next financial year," Bernstein said.

On its retail foray, it said Reliance is the offline leader with $18.5 billion of revenues coming from 11,000-plus stores. "The company is best positioned in New Commerce - digitizing the neighbourhood stores and in e-commerce (grocery/fashion categories)."

Also, fintech is another area in which Reliance is well positioned, it said identifying digitizing the kirana stores to accept digital payments and distributing mutual funds through Jio Money (payment app) as business opportunities.

Stating that media offers unique opportunities and synergies with telco, the analyst said Reliance has the dominant OTT platforms in India with content partnerships with Disney and Viacom.

"With activities spanning oil and gas, telecoms, retail media and fintech, Reliance is one of the most diversified conglomerates in India if not the world. There is simply no other company like it," Bernstein said. "In India, Reliance dominates energy, telco and retail in the same way that Exxon, AT&T and Amazon does in the US. But rather than three separate companies, Reliance comprises all three of these businesses rolled into one."

While Exxon is the world's largest publicly traded oil and gas company, AT&T is the world's largest telecommunications firm. Amazon is the world's largest online retailer.

Bernstein said Reliance has been unique in terms of entering new business areas and managing to achieve what the incumbent players and investors would never have thought possible. "This is a testament to Reliance management skills and ability to navigate some of the complexities which come with being a large operator in India."

While there have some failures, notably oil and gas production along the way, "what has impressed most is the strategic vision and execution ability of Reliance management to enter and 'win' in areas outside of core business," it said.

Over the past 10 years Reliance has undergone a transformation, which is almost unprecedented in corporate history, it said.

A decade ago 100 per cent of the EBITDA from the business came from energy-related business segments (refining, petrochemicals and E&P). This year FY20, the contribution from energy will fall to 64 per cent. "In two years (FY22), we expect that energy will fall below 50 per cent of the group EBITDA and by FY25, the energy-related business will account for around 30 per cent of group EBITDA," it said adding by FY23 telco will overtake energy to be the largest EBITDA contributing segment.

As Ambani embraced the new economy, Reliance sold out of the old economy - 30 per cent of upstream to BP in 2011 and an initial agreement with Aramco in 2019 for 20 per cent of the refining and petrochemical business).

The company, it said, could be a case study for other oil majors on how to evolve their business to compete in the low carbon world.

Reliance Industries declines 2% as investors book profit post Q3 results

Shares of Reliance Industries (RIL) slipped 2 per cent to Rs 1,546 on the BSE on Monday despite the company logging its highest-ever quarterly consolidated net profit of Rs 11,640 crore for the quarter ended December 31, 2019 (Q3FY20).

The stock has fallen 4 per cent from its early morning high of Rs 1,610 on profit-booking. During the past four months, RIL has outperformed the market by surging 32 per cent, as compared to a 15 per cent rise in the S&P BSE Sensex till Friday. It touched an all-time high of Rs 1,618 on December 20, 2019.

While the consolidated net profit jumped 13.5 per cent year-on-year (YoY), the consolidated revenue decreased by 1.4 per cent YoY to Rs 168,858 crore. "The decrease in revenue was primarily on account of a 10.6 per cent decline in order-to-cash (O2C) business revenues, with lower product price realization, and a 6.6 per cent fall in Brent Crude price," RIL said in a statement. The company announced results on Friday after market hours.

The stronger profitability in retail and telecom segments helped offset the sharp decline in petrochemical margins, the management said.

Petchem EBITDA (earnings before interest, tax, depreciation, and amortization)/mt was down around 20 per cent quarter-on-quarter (QoQ) on the back of a dip in PE/PP deltas by 30 per cent/43 per cent, PX/PTA by 17 per cent/39 per cent and polyester by 15-17 per cent due to higher feedstock prices, supply glut and global demand concerns.

Analysts at Emkay Global Financial Services have cut FY20/21/22 EBITDA estimates by 4 per cent/2 per cent/1 per cent, keeping in mind the weaker petchem margins, "although due to lower capex run-rate and strong Retail and Jio numbers", the brokerage firm retained its target price of Rs 1,740.

“The much-awaited International Maritime Organization (IMO) regulations will boost the core refining business. However, both refining and petchem segments face demand slack, given the impending capacity additions in CY20. We expect both segments to peak out in the near term. The monetisation of Jio’s infrastructure is a catalyst, but timing/pricing is crucial,” analysts at HDFC Securities said in results review note.

“Reported standalone EBITDA (earnings before interest, tax, depreciation, and amortization) was 10 per cent below our estimate at Rs 12,871 crore. Weak margins across petchem products and higher operating expenses have adversely impacted this segment,” the brokerage firm said with ‘neutral’ rating on the stock and 12-month target price of Rs 1,562 per share.

Reliance Retail Q3 pre-tax profit zooms over 62% to Rs 2,727 crore

The retail arm of Reliance Industries (RIL) posted earnings before interest, tax, depreciation and amortisation (Ebitda) of Rs 2,727 crore for the quarter ended December 31, 2019 (Q3), a year-on-year (YoY) growth of 62.3 per cent as it reaped benefits of scale during the period.

This is third straight quarter that Reliance Retail’s Ebitda has crossed Rs 2,000 crore. Along with telecom venture Jio, Reliance Retail now contributes 37 per cent to RIL’s Ebitda, the company said on Friday, adding that it plans to take this contribution to 50 per cent in the next few years.

However, the bigger surprise was on the revenue front. Reliance Retail’s revenue grew 27.4 per cent YoY during the quarter to touch Rs 45,327 crore, bucking the slowdown trend in the market.

The bulk of this growth, said Dinesh Thapar, group chief financial officer, Reliance Retail, was led by the company’s core retail operations in consumer electronics, fashion and lifestyle, and food and grocery, which now contributes 60 per cent of its topline and 87 per cent of earnings.

Excluding petro retail and Jio sales points, which are clubbed with Reliance Retail, revenue from core retail operations grew about 36 per cent in Q3, Thapar said.

The company also added 456 stores in Q3, taking its total store count to around 11,400 across 7,000 towns and cities.

ALSO READ: RIL revenues decline 2.5% in Q3; Reliance Retail, Jio boost profit

70 per cent of these stores, said Gaurav Jain, head, strategy and planning, Reliance Retail, were in tier-II, tier-III and tier-IV markets, with the company focusing on optimum value, segmentation and efficiency in sourcing to drive growth, he said.

In terms of retail area, the company covers 26.3 million sq ft in Q3, a growth of about 28 per cent from a year ago.

In a statement, RIL chairman Mukesh Ambani said Reliance Retail saw record footfalls led by a superior shopping experience, value and consistent same-store sales growth (SSG).

chartSSG for the quarter across the company’s retail formats was in the region of 11-14 per cent, said Jain, at a time when overall market sentiment remained weak.

The statement acquires significance given that overall consumer goods and retail market growth has slipped to low single digits in Q3, market research agency Nielsen and sector experts said. Yet, the country’s largest retailer continues to bet on aggressive store expansion, launching new brands and coming up with aggressive offers, they said. During the quarter, the grocery business saw the launch of a new store concept called ‘Smart Point’, positioned as a neighbourhood shop offering fresh food, pharmacy and assisted e-commerce. In consumer electronics, the company opened its 400th store in Q3, while fashion and lifestyle touched its 2,000-store milestone, it said.

Jiomart, which is the company’s new commerce venture, is currently being piloted in Navi Mumbai, Thane and Kalyan, Thapar said. He also said all options were open, as far as getting a strategic partner goes.

ALSO READ: Reliance Jio EBIT jumps 60% in Q3, operating revenue rises 28.3%

Rival Amazon has just committed $1billion to the India market, while Flipkart is investing in verticals such as grocery and food apart from electronics, fashion and lifestyle.

A recent Bank of America-Merrill Lynch (BoFA-ML) report had said that Reliance Retail would be key in driving up RIL’s market value to $200 billion in two years. On Friday, RIL touched Rs 10.02 trillion in market capitalisation after its shares rose nearly 3 per cent during trading session.

Reliance, BP pay $36 mn for exit of Niko in KG-D6 block, acquire 10% stake

Reliance Industries and UK's BP plc paid USD 36 million to get their defaulting Canadian partner Niko Resources to exit from the eastern offshore KG-D6 block.

In a statement, Niko said it has exited from the KG-DWN-98/3 block and its 10 per cent stake has been taken over by Reliance and BP.

The firm was paid USD 36 million to settle an arbitration it had initiated against Reliance and BP trying to force it out of the block over default in payment.

"An amendment to the production sharing contract for the D6 Block in India has been executed, reflecting the assignment of the 10 per cent interest previously held by the company's indirect subsidiary, Niko (NECO) Ltd to the remaining interest holders in the block, Reliance Industries Ltd and BP Exploration (Alpha) Ltd," the statement said.

Subsequent to this, Reliance's stake in KG-D6 has gone up to 66.67 per cent from the previous 60 per cent and that of BP to 33.33 per cent from 30 per cent.

"Niko NECO had entered into a settlement agreement with Reliance and BPEAL under which it agreed to withdraw from D6 PSC and settle its arbitration case filed under the rules of the London Court of International Arbitration in December 2017 in exchange for a settlement amount of USD 36 million, subject to adjustment prior to closing," it said.

The settlement agreement is subject to certain conditions precedent including the execution of the amendment to the D6 PSC, it said adding the USD 36 million will go lenders to settle a part of the debt.

Niko, which defaulted on payment of loans to its lenders, had been unsuccessful in seeking a possible buyer for its 10 per cent stake in Bay of Bengal block KG-D6 or securing financing for its share of the USD 5 billion R-Cluster, Satellite Cluster and MJ development projects in the block.

This led to the company defaulting in making payments for its share of development cost.

Reliance, being the operator of KG-D6 block, slapped a default notice on Niko soon after.

Under the terms of the joint operating agreement (JOA) between the participating interest holders in the KG-D6 production sharing contract (PSC), during the continuance of a default, the defaulting party shall not have a right to its share of revenue (which shall vest in and be the property of the non-defaulting parties who have paid to cover the amount in default).

In addition, if the defaulting party does not cure a default within 60 days of the default notice, the non-defaulting parties have the option to require the defaulting party to withdraw from the KG-D6 PSC and JOA.

In December 2018, Reliance and BP sent Niko a notice asking it to withdraw from KG-D6. Parallelly, they approached the sector regulator the Directorate General of Hydrocarbons (DGH) and the Oil Ministry for approval to take over Niko's share.

To stall the takeover, Niko filed a notice of arbitration challenging the withdrawal notice.

Niko had previously withdrawn from the eastern offshore NEC-25 block due to cash crunch. Its 10 per cent interest was assigned to Reliance and BP. Subsequent to that, Reliance now holds 66.6 per cent interest in NEC-25 and BP the remaining 33.37 per cent.

Reliance and BP are investing USD 5 billion to bring to production three sets of new discoveries in the KG-D6 block. R-Series will be the first to start output in mid-2020 with about 5 million standard cubic metres of daily production. The peak from R-Series is expected at 12 million standard cubic metres per day (mmscmd).

Satellite fields in the same block will go live a year later and are expected to contribute a peak output of 7 mmscmd. MJ field will start production in second half of 2022 with peak production of about 12 mmscmd.

Reliance has so far made 19 gas discoveries in the Bay of Bengal block. Of these, Dhirubhai-1 and 3 (D1 & D3) -- the largest among the lot -- were brought to production from April 2009 and MA, the only oilfield in the block was put to production in September 2008.

The output from D1 and D3 has dwindled to just 1.7 mmsmcd after touching a peak of 54 mmscmd in 2010. MA ceased to produce last year.

RIL slips nearly 3% as govt seeks to block $15 bn Saudi Aramco deal

Shares of Reliance Industries (RIL) declined as much as 2.77 per cent in the early trade on the BSE on Monday after the government filed petition in the Delhi High Court (HC) seeking to block its $15 billion deal with Saudi Aramco, in view of dues of $3.5 billion in the Panna-Mukta and Tapti (PMT) oil and gas fields.

At 09:49 am, the stock was trading over 2 per cent lower at Rs 1,566 apiece on the BSE. In comparison, the S&P BSE Sensex was trading flat at 41,667 levels, down 15 points or 0.04 per cent.

In a counter affidavit, the oil-to-telecom behemoth said it was a ‘falsehood’ that the arbitration tribunal had passed an award requiring the company and its partners to pay $3.5 billion to the government. It said the petition was an abuse of process as “it portrays that a sum of money is due and payable under the final award and purports to compute the money payable on a basis neither found in the arbitration award nor disclosed in the petition.” 

An international arbitration tribunal issued a partial award in October 2016 in the dispute between the Government of India (GoI), BG Exploration & Production India (BG), and RIL regarding the Panna-Mukta and Tapti production sharing contracts (PSCs). The tribunal in its 2016 award determined certain issues of principle.

RIL said pursuant to the 2018 award, the government’s claim comes down very significantly — a fact which the government has not taken cognisance of and approached the Delhi HC prematurely for enforcement of its claim computed based on its interpretation of the 2016 award.

In another development, the company announced that after 25 years of operating the Panna-Mukta oil and gas fields, the Panna-Mukta and Tapti (PMT) Joint Venture partners will be handing over the PannaMukta oil and gas fields back to the government's nominee i.e. ONGC on December 21.

RIL mounts counter to govt petition seeking to block its $15 bn Aramco deal

Reliance Industries has mounted a strong counter to the government petition in the Delhi High Court seeking to block its $15 billion deal with Saudi Aramco, saying "the petition is an abuse of process as no arbitration award has fixed any final liability of dues on the company."

In a counter affidavit, Reliance said it was a "falsehood" to say that the arbitration tribunal had passed an award requiring the company and its partners to pay $3.5 billion to the government."

It said "the petition is an abuse of process as "it portrays that a sum of money is due and payable under the final award and purports to compute the money payable on a basis neither found in the arbitration award nor disclosed in the petition."

The government, it said, has calculated on its own volition the revised figure of its share of profit from oil and gas production allegedly due by extrapolating the purported finds.

The affidavit came in response to the government moving the Delhi High Court seeking to block Reliance selling 20 per cent stake in its oil and chemical business to Saudi Aramco for $15 billion, in view of pending dues of $3.5 billion in Panna-Mukta and Tapti oil and gas fields.

An international arbitration tribunal issued a partial award in October 2016 in the dispute between the Government of India (GoI), BG Exploration & Production India Limited (BG) and Reliance Industries Limited (RIL) regarding the Panna-Mukta and Tapti Production Sharing Contracts (PSC).

The tribunal in its 2016 award determined certain issues of principles. Pending determination of all issues before it, appropriately, it did not award any monetary sums. Quantification of amounts, if any, by the tribunal is to be done when all issues have been decided.

Certain parts of the 2016 award were challenged by BG/RIL before an English court wherein it decided some parts of challenge in favour of BG/RIL and directed the arbitration tribunal to reconsider those parts of the 2016 award. The tribunal, having reconsidered, issued another partial award in December 2018 which was in favour of BG/RIL."

While this challenge was pending in the English court, GoI unilaterally calculated certain amounts, based upon its interpretation of the 2016 award, which the government alleges are payable by Oil & Natural Gas Corporation (ONGC), BG and RIL.

Reliance said pursuant to the 2018 award, GoI's claim comes down very significantly -- a fact which the government has not taken cognisance of and approached the Delhi High Court prematurely for enforcement of its claim computed based on its interpretation of the 2016 award.

RIL maintained that except as quantified by the tribunal, no amount can be said to be payable at this stage.

GoI has challenged the 2018 award and the English court is yet to pronounce its judgment.

One of the most significant issues pending before the tribunal is an increase in the Cost Recovery Limit under the PSC. The arbitration tribunal is scheduled to hear BG/RIL's application for increase of PSC Cost Recovery Limit next year.

If the tribunal decides in favour of BG/RIL, then GoI's computation of sums allegedly payable by ONGC, BG and RIL is expected to further come down.

Final amounts payable, if any, by the parties (ONGC 40 per cent, BG 30 per cent and RIL 30 per cent) can only be determined by the arbitration tribunal in the quantification phase of the arbitration which will be scheduled after it has decided on all the issues before it, it said.

ONGC, who was directed by GoI in 2011 not to participate in the arbitration proceedings but be bound by the award, wrote to the stock exchanges in May 2018 that the government's demand is premature.

The 2016 award, in part superseded by the 2018 award, cannot be said to have attained finality and attempts to enforce the 2016 award are premature, RIL said.

Reliance Industries highest bidder for Reliance Infra tower & fibre assets

Reliance Industries (RIL) has offered to buy out Reliance Infratel for Rs 3,600 crore, payable in 60 days — the highest bid of upfront cash for the company, said sources. Bharti Airtel, said sources involved in the process, has bid much lower at around Rs 1,800 crore.

Reliance Infratel, which controls towers and fibre assets, is one of the three companies that are on offer as part of the process under the Insolvency and Bankruptcy Code (IBC). The other two are Reliance Communications (RCom) and Reliance Telecom, which house the spectrum assets. RCom has real estate assets and enterprise businesses also.

In a meeting of the committee of creditors held on Friday, SBI Caps, which is undertaking a detailed evaluation of the bids, asked for more time to evaluate other competing bids, many of which are based on conditions including staggered payment rather than an upfront offer.

According to a top source, the process could take one to two weeks before a final announcement is made.

Sources in the know said Bharti Airtel had bid for the spectrum assets of RCom and Reliance Telecom but not for the real estate assets. That apart, it has offered to make only a staggered payout for the spectrum. It means the company will fork out the money based on the schedule of deferred payment.

According to sources, the Bharti bid has to be evaluated in detail before the deal is wrapped by the deadline of the first week of January, which is given by the National Company Law Tribunal (NCLT).

Similarly, the offers by Varde Partners and Delhi-based UV Asset Reconstruction Company have conditions including investing in the company, turning it around, selling the assets, and paying back the lenders rather than making an upfront offer. Emails to Bharti Airtel and Reliance Jio on the Reliance Infratel offer did not elicit any response.

For RIL the offer to buy the infrastructure assets fits in with its overall strategy. Last year, Jio had signed an agreement to buy the 43,000 towers of Reliance Infratel. It was the only tenant after RCom stopped mobile services. It also was using the 178,000 kilometre of fibre to roll out fibre to the home, as well as backend connectivity to its towers, unlike competitors who use microwave links, which are not as efficient to deliver high data speeds to consumers.

At that time RIL was offering Rs 25,000 crore, which included payment for the use of the spectrum. But the deal did not materialise because the Department of Telecommunications insisted that the promoters of Jio or RCom give an undertaking that they would be responsible for paying past dues. Jio refused to give an undertaking. Even the creditors could not come to a consensus on whether to clear the asset sale. Consequently, RCom went to the NCLT.

Jio has been using 58 MHz of RCom spectrum in the 800 MHz band across 21 circles through a spectrum-sharing agreement signed. However, sources say that it decided not to bid for the spectrum, especially with complications arising from the Supreme court judgment, under which RCom has to fork out Rs 21,000 crore as adjusted gross revenue and spectrum user charges.

This spectrum is crucial for 4G services and the licence ends in 2021. RCom has over 122 MHz of spectrum.

Reliance Industries, ICICI Bank propel Nifty to fresh record high

Reliance Industries (RIL) and ICICI Bank contributed more than 100 points to the Nifty 50 index which hit an all-time high of 12,132 points today.

The benchmark index surpassed its previous high of 12,103, hit on June 3, 2019 in intra-day trade, on the back of strong buying by foreign portfolio investors (FPIs).

RIL contributed 181 points, while ICICI Bank contributed 132 points of the total Nifty gain during the period. HDFC Bank, Hindustan Unilever, Housing Development Finance Corporation (HDFC) and Bharti Airtel contributed 40 – 60 points of the total benchmark index.

With today’s gain, the Nifty 50 index has rallied 14 per cent, or 1,495 points, from its recent low of 10,637, hit on August 23, 2019.

Since September, FPIs have pumped in net amount of Rs 37,496 crore ($ 5.28 billion), while domestic mutual funds invested net amount of Rs 12,618 crore in equities, Sebi data shows.

Meanwhile, more than half or 28 stocks from the Nifty 50 index recorded decline in their market price from their respective June 3, 2019 levels. Shares of private sector lender YES Bank tanked 55 per cent during the period.

State-owned stocks like Gail (India), Oil and Natural Gas Corporation (ONGC), Coal India and Indian Oil Corporation were down between 23–32 per cent each, while ITC, Larsen & Toubro, Mahindra & Mahindra (M&M), Wipro, Tata Steel, Cipla and UltraTech Cement down in the range of 10-20 per cent.

Company 03/06/2019 LTP % chg

Bharti Airtel 352.75 438.60 24.3

Nestle India 11686.45 14335.00 22.7

B P C L 417.10 503.20 20.6

ICICI Bank 422.90 503.45 19.0

Bajaj Fin. 3511.05 4149.50 18.2

Asian Paints 1459.25 1716.00 17.6

Eicher Motors 19948.15 23137.65 16.0

Reliance Inds. 1360.20 1564.10 15.0

Hind. Unilever 1839.70 2056.95 11.8

Bajaj Finserv 8348.10 9193.00 10.1

Sun Pharma.Inds. 416.80 455.15 9.2

Dr Reddy's Labs 2724.10 2948.55 8.2

Bajaj Auto 3034.60 3191.10 5.2

Kotak Mah. Bank 1531.25 1598.00 4.4

HDFC Bank 1228.55 1278.25 4.0

HDFC 2230.45 2301.00 3.2

Britannia Inds. 2970.20 3058.10 3.0

Maruti Suzuki 7022.90 7208.40 2.6

Power Grid Corpn 193.05 196.05 1.6

HCL Technologies 1115.20 1129.60 1.3

Hindalco Inds. 199.40 200.30 0.5

Tech Mahindra 757.60 759.95 0.3

St Bk of India 355.45 338.85 -4.7

Tata Motors 174.50 165.20 -5.3

Infosys 744.65 703.15 -5.6

JSW Steel 274.55 256.10 -6.7

Titan Company 1266.25 1178.20 -7.0

Axis Bank 812.65 754.20 -7.2

TCS 2242.30 2079.55 -7.3

IndusInd Bank 1662.65 1510.00 -9.2

Grasim Inds 895.05 805.60 -10.0

Zee Entertainmen 359.55 323.00 -10.2

ITC 278.55 248.75 -10.7

NTPC 133.10 118.60 -10.9

Adani Ports 424.75 375.00 -11.7

Larsen & Toubro 1559.40 1374.75 -11.8

Vedanta 164.20 144.60 -11.9

Bharti Infra. 268.75 236.15 -12.1

Hero Motocorp 2840.25 2488.70 -12.4

UltraTech Cem. 4762.30 4150.50 -12.8

Cipla 568.25 486.10 -14.5

Tata Steel 497.65 422.00 -15.2

M & M 653.40 547.80 -16.2

Wipro 291.30 242.40 -16.8

UPL 671.40 545.50 -18.8

IOCL 169.70 131.90 -22.3

ONGC 172.15 132.30 -23.1

Coal India 260.90 200.15 -23.3

GAIL (India) 178.73 124.15 -30.5

Yes Bank 149.45 67.20 -55.0

Mukesh Ambani's RIL beats BP to make elite club of 6 global energy giants

Reliance Industries Ltd., run by Asia’s richest man Mukesh Ambani, has eclipsed BP Plc to break into an elite club of energy supermajors.

The Indian conglomerate’s market capitalization was about $133 billion, overtaking the British energy giant’s $132 billion value at the close of trading on Tuesday. Reliance’s shares have increased at three times the pace of India’s benchmark index this year after its billionaire owner in August announced plans to cut the company’s net debt to zero in 18 months through measures including a stake sale in the oil-to-chemicals business to Saudi Aramco.

The surge in shares gives Ambani a net worth of $56 billion, making him Asia’s richest person, above Alibaba Group’s Jack Ma, according to the Bloomberg Billionaires Index.

Reliance’s market value briefly surpassed BP for the first time at the end of last month, and it has now regained the lead over the British company after its shares ended at a record high in Mumbai. It also narrowing the gap with PetroChina Co., currently Asia’s biggest oil company by market cap.

Reliance has increased 35% this year, compared with BP’s 1.2% gain as it works on cutting high debt levels. Oil companies have struggled because of swings in crude prices and as uncertainty persists over future energy demand.

Reliance, meanwhile, has benefited in a number of ways. It operates the world’s biggest oil-refining complex in western India, which can process low-quality crude and turn it into higher-grade fuels, partly protecting it from volatility in prices.

Telecom, Retail

While Reliance gets two-third of its revenue from energy, Ambani has also made massive investments in telecom and digital services as he looks to benefit from growing demand in the world’s second-biggest market for mobile phone users. He has also expanded the company’s retail business to take on Amazon.com Inc. and Walmart Inc.

The telecom unit, Reliance Jio, which claims to be world’s largest mobile data network, was also bolstered by a recent blow to India’s wireless carriers that left Ambani’s company largely unscathed.

Reliance is now the world’s sixth-largest oil company, with Exxon Mobil Corp. topping the list with a market value of about $290 billion. Aramco, formally known as Saudi Arabian Oil Co., is planning an initial public offering with a valuation target of between $1.6 trillion and $1.7 trillion, which would make it the world’s biggest.

Reliance Industries logs fresh all-time high, hits Rs 9.5 trillion m-cap

Reliance Industries (RIL) today became the first Indian company to cross the market capitalisation of Rs 9.50 trillion after the company's stock rallied over 3 per cent intra-day to hit a fresh all-time high of Rs 1,508.45 on the BSE.

RIL jumped 3.3 per cent to Rs 1,508.45, surpassing its previous high of Rs 1,490 touched on October 31, 2019 in intra-day trade. At 12:39 pm, the Mukesh Ambani-led RIL had the market-cap of Rs 9.54 trillion, BSE data shows.

On October 18, RIL had become the first company to cross the market-cap of Rs 9 trillion. Thus far in the calendar year 2019 (CY19), the stock price of RIL has rallied 34 per cent, as compared to 12 per cent rise in the S&P BSE Sensex. The company’s market-cap has surged by Rs 2.3 trillion thus far in CY19.

Shares of other telecom services providers Vodafone Idea and Bharti Airtel too rallied today after they decided to raise tariffs starting next month, the first increase since the entry of RIL’s telecom subsidiary Reliance Jio Infocomm.

“The acute financial stress in the telecom sector has been acknowledged by all stakeholders and a high level Committee of Secretaries (CoS) headed by the Cabinet Secretary is looking into providing appropriate relief,” Vodafone Idea said in a statement.

Mobile data charges in India are by far the cheapest in the world even as the demand for mobile data services continues to grow rapidly. To ensure that its customers continue to enjoy world class digital experiences, Vodafone Idea will suitably increase the prices of its tariffs effective 1 December 2019, it added.

Analysts at JP Morgan see limited telecom tariff hikes by RIL until Jio hits around 50 crore subscribers (which is at least one year away). Given the IUC pass-through, Jio margins should further expand from here. Over the next six months, the key stock price drivers we see are completion of the Saudi Aramco investment and the structure, and further increase in tariffs, the brokerage firm said recent report. The stock however, trading above price target of Rs 1,400 per share.

Mukesh Ambani to set up Alphabet-like Rs 1.08-trillion digital company

Reliance Industries, controlled by Asia’s richest man Mukesh Ambani, will set up a holding company on the lines of Alibaba Group Holdings and Alphabet that will create digital services and allow for a strategic or financial investor.

The oil-to-retail conglomerate will infuse Rs 1.08 trillion ($15 billion) in the new company in the form of so-called optionally-convertible preference shares. The newly-formed unit will in turn invest the same amount in Reliance Jio Infocomm Ltd. and acquire the parent’s equity investment of Rs 650 billion in the wireless carrier, Reliance Industries said in a statement on Friday.

Following the equity infusion, Reliance Jio will transfer liabilities worth Rs 1.08 trillion to a subsidiary of the parent, turning Jio almost debt free by March 31, 2020, excluding airwave-related liabilities.

After spending almost $50 billion on a 4G wireless network that started services in 2016, Ambani is now cleaning up the balance sheets of his companies with the goal of making Reliance Industries a zero-net-debt company in less than two years. Jio’s debt stood at about Rs 840 billion as on Sept. 30, Chief Financial Officer V. Srikanth said earlier this month.

Ambani may also be preparing Jio for an initial public offering. In the three years since its debut, Jio has vaulted to the No. 1 position in the world’s second-biggest wireless market as it lured more than 350 million users with free calls and cheap data. Ambani said in August that Reliance will start preparing to list its telecommunications and retail businesses within five years.

Reliance Jio posted a stand-alone profit of Rs 9.9 billion for the quarter ended Sept. 30 on revenue of Rs 123.54 billion.

RIL says on track to produce gas from new field in KG-D6 block by mid-2020

Reliance Industries Ltd has said that it is on track to start production from a new gas field in the flagging KG-D6 block in the Bay of Bengal from mid-2020 even as output from its existing fields continued to fall.

Reliance and its partner BP Plc of the UK had in June 2017 announced an investment of Rs 40,000 crore in the three sets of discoveries to reverse the flagging production in KG-D6 block.

These finds were expected to bring a total 30-35 million cubic metres (1 billion cubic feet) of gas a day onstream, phased over 2020-22.

The three sets of discoveries are R-Cluster, Satellite Cluster and MJ field. R-Cluster will be first to come on stream.

"On track for gas from R-Cluster in mid-2020," Reliance said in an investor presentation post announcing its second quarter earnings.

The company has already drilled all the six wells on the field and "second campaign for installation of subsea production system (SPS)" was progressing, it said.

Drilling of three out of the five wells on Satellite Cluster has been completed and engineering and fabrication for SPS was on track, it said.

Satellite Cluster is to begin production in 2021.

For MJ, first phase of drilling will commence in January-March 2021, it said.

Reliance has so far made 19 gas discoveries in the KG-D6 block. Of these, D-1 and D-3 -- the largest among the lot -- were brought into production from April 2009 and MA, the only oilfield in the block, was put to production in September 2008.

The output from D-1 and D-3 has fallen sharply from 54 million standard cubic metres per day (mmscmd) in March 2010 to 1.68 mmscmd in the July-September, the presentation said.

The fields had produced an average of 1.76 mmscmd of gas in April-June 2019. MA field ceased to produce last year.

"D1-D3 fields in a late life stage and affected by low pressure and water ingress related challenges," the presentation said.

Reliance is the operator of the block with 66.6 per cent interest while BP holds the remaining stake in the block.

MJ gas find is located about 2,000 metres directly below the currently producing Dhirubhai-1 and 3 (D1 and D3) fields in the KG-D6 block and is estimated to hold a minimum of 0.988 trillion cubic feet (Tcf) of contingent resource.

Besides MJ-1, four deepsea satellite gas discoveries -- D-2, 6, 19 and 22 -- are planned to be developed together with D29 and D30 finds on the block. The third set is the D-34 or R-Series find.

The government had in 2012 approved a USD 1.529 billion plan to produce 10.36 mmscmd of gas from four satellite fields of block KG-DWN-98/3 (KG-D6) by 2016-17.

The four fields have 617 billion cubic feet of reserves and can produce gas for eight years.

However, the companies did not begin the investment citing uncertainty over gas pricing.

After the government allowed a higher gas price for yet-to-be-developed gas finds in difficult areas like the deep sea, RIL and BP decided to take up their development.

RIL-BP have kept the USD 3.18 billion investment plan for D-34 or R-Series gas field in the same block, which was approved in August 2013. About 12.9 mmscmd of gas for 13 years can be produced from D-34 discovery, which is estimated to hold recoverable reserves of 1.4 trillion cubic feet.

Other discoveries have either been surrendered or taken away by the government for not meeting timelines for beginning production.

Reliance Retail bucks trend as revenue rises 27%; pre-tax profit up 67%

The retail arm of Reliance Industries (RIL) posted a pre-tax profit of Rs 2,322 crore for the quarter ended September 30, (Q2) year-on-year (YoY) growth of nearly 67 per cent as it reaped benefits of scale during the quarter.

This is the second straight quarter that Reliance Retail’s earnings before interest, tax, depreciation, and amortisation (Ebitda) has crossed Rs 2,000 crore. Along with the telecom venture Jio, Reliance Retail contributes nearly a third of its earnings, RIL said on Friday, with a plan in place to take contribution of the two businesses to 50 per cent in the next few years. But the bigger surprise was on the revenue front.

Reliance Retail’s revenue grew 27 per cent YoY during the quarter to touch Rs 41,202 crore, bucking the slowdown trend in the market. The company also added 337 stores in Q2, taking its total count to 10,901 stores across 6,700 towns and cities. In terms of retail area, the company covers 24.5 million sq ft in Q2, growth of nearly 26 per cent from a year ago.

In a statement, RIL Chairman Mukesh Ambani said Reliance Retail gained from optimum customer value proposition, segmentation and a targeted strategy in the July-September period even as the consumer slowdown got worse.

“The gains of modern retail are being brought to the real ‘Bharat’ as more than two-third of stores are operated in tier-II, tier-III, and tier-IV towns,” the company said.

This statement acquires significance given that rural consumer goods growth has plunged to a seven-year low in Q2, market research agency Nielsen said on Thursday. Yet, the country’s largest retailer continued to bet on small-town growth, sector analysts said.

Reliance Retail, which first began operations in 2006, is present across areas such as food and grocery, consumer electronics, fashion and lifestyle. It also has 516 petro retail outlets and 8,157 Jio sales points as part of its business.

During the quarter, Reliance Trends Small Town, the company’s apparel retail chain in smaller cities, crossed 100 stores. The retailer opened its 200th Reliance SMART store, which is into food and grocery, and launched its 100th Hamleys store in the country. The company had announced the acquisition of Hamleys, the British toy retailer in the June quarter, for Rs 620 crore.

In all, the company added 43 stores in food and grocery, 100 stores in consumer electronics, and 76 stores in fashion and lifestyle during the quarter. Also, Reliance Brands, which is part of Reliance Retail, announced a joint venture with Tiffany & Co to bring the American luxury jewellery retailer to India. It also announced a tie-up with WOMO Bullfrog, a premium Italian men’s cosmetics brand during the quarter.

Reliance puts off gas bid to Nov 6 on bidders request due to festive season

Reliance Industries has put off bidding for the new gas it plans to produce from eastern offshore KG-D6 block to next month following a request from potential bidders, sources said.

Reliance and its partner BP Plc of the UK, last month had put out Notice Inviting Offer (NIO) seeking bids from potential users for the 5 million standard cubic meters per day of natural gas they plan to produce from the R-Cluster Field in KG-D6 block from the second quarter of 2020.

The bidding was to happen on October 11, according to the bid document.

However, the bidding has been postponed based on requests of some bidders given the holiday/festival period during October, sources said adding that bidding will now happen on November 6.

Bidders have been asked to quote a price (expressed as a percentage of the dated Brent crude oil rate), supply period and the volume of gas required.

Dated Brent means the average of published Brent prices for three calendar months immediately preceding the relevant contract month in which gas supplies are made.

Reliance set a floor or minimum quote of 9 per cent of dated Brent price -- which means bidders would have to quote 9 or a higher percentage for seeking gas supplies.

At USD 60 per barrel price, the gas price comes to $5.4 per million British thermal unit (mmBtu).

The rate sought compares to the government-mandated $3.23 price that its currently producing Dhirubhai-1 and 3 fields in KG-D6 block get.

The government gas pricing policy, however, provides for a higher cap price for future gas produced from difficult fields like those in deepsea. This cap currently is fixed at $8.43 per mmBtu.

Reliance-BP is developing three sets of discoveries in KG-D6 block -- R-Cluster, Satellites and MJ -- by 2022 that can produce a peak of 30 mmscmd of gas.

The quantity offered for bidding in the NIO is 5 mmscmd from R-Series fields which will start production in mid-2020.

Sources said, peak output from R-Series is 12 mmscmd, while Satellites will produce another 7 mmscmd beginning mid-2021. MJ field, which will start production in the second half of 2022, also has a planned peak output of 12 mmscmd.

The NIO said the gas price would be lower of the quoted rate or the government-mandated ceiling for the difficult fields.

The formula Reliance is using to price gas for R-Series fields is different from its last price discovery it made for the coal seam gas (CBM) from its Sohagpur coal-bed methane blocks in Madhya Pradesh.

For Sohagpur CBM, it had in 2012 sought bids at a benchmarked rate at 12.67 per cent of JCC, or Japan Customs-Cleared Crude, plus USD 0.26 per mmBtu.

The formula was the same at which Petronet LNG, a joint venture of public sector oil companies, whose chairman is the oil secretary, used to buy long-term liquefied natural gas (LNG) from Qatar.

At USD 60 per barrel oil price, CBM from its Madhya Pradesh block was to cost $7.8. That formula was, however, rejected by the oil ministry even though 59 valid bids seeking about 70 mmscmd of gas were received in the open tender.

In 2017, it changed the formula by seeking bids in the form of a deductible from 12.67 per cent of prevailing Brent crude oil price plus $0.52 per mmBtu plus $0.26 per mmBtu, according to the bid document of CBM pricing.

Reliance ended up buying the CBM gas from its block after it bid deducting $1.836 per mmBtu, lower than $3.156 bid by rival Piramal Glass and $3.495 bid by state-owned GAIL.