Indian Retailer

India’s most valuable company Reliance Industries (RIL) may neither start any green field initiative nor raise new funds in the current financial year, as the oil-to-retail conglomerate looks to consolidate its diverse portfolio of businesses and improve operational efficiency.

“The next two years will be about consolidation in our businesses. For instance, we have 900 stores in Reliance Retail, which will be consolidated before we further scale up numbers. It is important to get our cost structure right,” said a senior RIL official, who didn’t want to be named. This will be a sharp departure from previous company policy of investing heavily in new projects.

In the past few years, the Mukesh Ambani-controlled RIL has undertaken mega projects such as the $6-billion refinery in Jamnagar special economic zone (SEZ), the $9-billion deep water gas development project in the Krishna-Godavari basin, the launch of Reliance Retail and SEZs in Haryana and Jamnagar.

A company spokesman told ET that RIL had not made any commitments for any new Greenfield projects. “However, we will continue to have meaningful capex in our existing businesses in coming years, including ramping up and maintaining 80 mmscmd of gas production (in the KG basin) and also on exploration,” he said.

RIL started pumping gas from the KG basin in the eastern coast early last month. It plans to ramp up production to 40 mmscmd by July, and double it by December. Another RIL official, who also asked not to be named, said the company was unlikely to raise funds this year and will fund capital expenditure through internal accruals and revenues to be generated by the sale of KG basin gas.

The company is sitting on cash reserves of $5 billion (Rs 25,000 crore), mainly invested in deposits, government securities and bonds. Its outstanding debt stood at Rs 53,457 crore as on March 31, 2009, against Rs 36,480 crore a year ago.

An analyst with an international brokerage firm said that its large cash pile would spare RIL the need to raise money from the markets this year, but that situation could change. “They may have to borrow if the company wins the Venezuela oil field,” he said.

RIL has shown interest for bidding jointly with ONGC for an oil field in Carabobo region, which the Venezuelan government has put on the block. The successful bidder may require $10 billion for acquisition of a 40% stake.

RIL, with market cap of Rs 2,83,708 crore as on Wednesday, had always been aggressive and innovative in raising finances.

In November 2008, when India was beginning to feel the pinch of the global credit crunch, RIL was quick to raise Rs 5,000 crore in debt from commercial lenders, as well as, a set of institutional investors, signalling that it expects liquidity to only get tighter.