Mumbai: Battling a sharp dip in output at its showpiece gas field, Reliance Industries on Thursday announced plans to invest Rs 100,000 crore across energy, retail and telecom businesses in the next five years to double operating profit.
RIL aims to increase revenue from retail business by as much as six times in 3-4 years and is targeting a ten-fold increase in sales from its shale gas business in the US, Chairman Mukesh Ambani told company shareholders here on Thursday.
It is investing over USD 12 billion in the refining and petrochemical industries and has drawn plans to double natural gas output from its flagging KG-D6 fields to 60 million cubic meters a day on a "sustained" basis.
RIL, which once was India's most valuable firm, has reported two straight quarters of decline in net profit, its shares are near a 3-year low, and a mounting cash pile has made investors wary of its outlook.
"I have set myself the target to double the operating profit of your company in about five years," Ambani said.
Operating profit fell 9 percent to Rs 22,225 crore in the year ended March 31, the first decline since 2003. Standalone net profit was down to Rs 20,040 crore in 2011-12 from Rs 20,286 crore a year earlier.
"We are now ready for the next period of growth at Reliance by investing across all our core businesses in new capacity and margin improvement projects," Ambani told the company's annual general meeting.
The firm will "invest nearly Rs 1 lakh crore over the next five years to build a stronger and more diversified Reliance," he said.
Ambani, the richest Indian, said high rates of inflation, adverse foreign exchange rate movements, continuing fuel subsidies and slowdown in rate of economic growth has had an impact on doing business in the country.
Much of RIL's recent troubles have centred on eastern offshore KG-D6 fields, where output has dropped to about 32 mmcmd from 61.5 mmcmd achieved in March 2010, instead of rising to projected 80 mmcmd. The drop in output has led to oil ministry slapping over USD 1 billion penalty on RIL.
"The reserves from existing D1-D3 field (the main gas fields in Krishna Godavari basin KG-D6 block) have proved far more difficult to produce than anticipated," Ambani said.
"We have experienced some disappointment with the reserves and consequently seen production drop below the originally estimated quantities," he said adding RIL and its new partner BP plc were working to decipher the complex geology of KG-D6.
The duo are focusing on "new wave of development" in the satellite fields around D1-D3 fields, which can yield 30 mmcmd, he said.
Also, RIL would begin output from its two coal bed methane (CBM) blocks in Sohagpur, Madhya Pradesh by 2015 if approvals come in time.
"We are targeting to achieve, in the next three to four years, a total production of 60 mmcmd gas for a sustained period," he said.
Sale from shale gas in US, in which the firm has already investment more than USD 3.5 billion, is expected to increase ten-fold to nearly 300 billion cubic feet in next five years.
RIL, the nation's second biggest retailer behind Future group, is aiming to achieve Rs 40,000-50,000 crore in sales from its retail business in 3-4 years.
"We expect this business to be profitable within the same time period," he said. "Reliance Retail will be one of our important growth engines in the next few years and will have among the highest growth rates and earnings potential".
RIL operates 1,300 stores under its retail business that sells consumer goods, including apparel, food and electronics.
In 2011-12, Reliance Retail clocked sales of about Rs 7,600 crore.
RIL is investing USD 8 billion, the most since it completed a second oil refinery in 2008, in expansion of its petrochemical business to meet rising demand of plastics and polyester.
Also, it is setting up a USD 4 billion petroleum coke gasification project that will produce synthetic natural gas that will replace expensive LNG as fuel.
On its telecom foray, RIL is finalising 4G commercial rollout plans but Ambani did not give a firm date for the launch of the much-anticipated service.
"Reliance has a unique green-field opportunity to create a state-of-the art digital services platform, without being constrained by any legacy issues," he said. "Our vision is to help develop the hard, soft and social infrastructure needed to create an integrated digital services business model".
The firm plans to "provide end-to-end solutions that address the complete digital value chain across various digital services," he said. "We are working on building the requisite parts of this customers' experience".
RIL plans to provide an ever growing range of digital services in key domains of national interest such as education, healthcare, security, financial services, government-citizen interfaces and entertainment.
"We are currently finalising our plans to offer services on a nation-wide basis and will be happy to report our progress in the coming years," he added.
KG-D6 output is expected to average 28 mmcmd this fiscal and may decline to 20 mmcmd in 2014-15, Oil Minister S Jaipal Reddy had told Parliament last month.
First Published: Thursday, June 07, 2012, 12:53