Reliance: Boost To Billions
Richest Indian Mukesh Ambani’s personal wealth swelled 70 per cent in 2017 after a consistent upswing in the valuation of Reliance Industries (RIL) stock all through the year. The boost in market perception on the RIL stock was largely driven by the company’s robust financial performance in the petroleum and petrochemical business and the prospect of a much scaled up digital communication business.
Reliance delivered an outstanding financial performance in 2017 with its significantly improved refining margin and growth in petrochemicals business. In addition, a boost in the market perception about Reliance Jio’s large scale penetration in the country’s ever increasing mobile data market through a zero voice and dirt cheap data service further accelerated the growth in the market value of the parent company.
Ambani and family, including his mother Kokilaben D. Ambani, together hold 47.48 per cent stake in RIL (as on 31 December, 2017). The market value of RIL, the country’s most valued company in the private sector, touched Rs 6,10,938.21 crore as on 25 January. The share price moved from the lowest of Rs 508.05 to Rs 990 a unit during the last 12-month period.
The Bloomberg Billionaires Index that tracks the daily ranking of the world’s richest people based on their net worth, showed growth of $17.4 billion in Ambani’s net worth, scaling 76.3 per cent in 2017. He is now ranked 20th among the world’s richest.
Best Business Performance
“I am happy to report that we have delivered superior financial performance, improved capital efficiency and continued strong project execution. Our focus on delivery and growth continued to yield results in what was a difficult year for many of our peers globally,” Ambani said while addressing his shareholders after a stupendous performance of the company during 2016-17.
Reliance delivered much better operational and financial performance during the year, resulting in net profit of Rs 29,901 crore ($4.6 billion), growing 18.8 per cent as compared to the previous year. According to RIL, the most significant factors that contributed to this profit growth included improvement in the petrochemicals and refining margins.
“Refining and petrochemicals businesses achieved record levels of profitability, underpinned by our ability to access feedstock competitively from global markets, maintain high operating rates and place products in growth markets. The refining business delivered double-digit gross refining margins (GRMs) for the second year in a row, benefitting from the global demand for transportation fuels and stable product cracks,” he said in the annual address.
India (too) has now become a major force in driving global oil demand growth and is currently the world’s third largest oil consumer. Oil demand in India grew 5.2 per cent during the year under review led by strong growth in gasoline and jet fuel. Although the growth in diesel demand in this market remained muted as industrial cycle lagged consumption, the demand for certain petrochemical products, including polymer and polyester continued their growth momentum.
Industry analysts had predicted strong performance of RIL stock in the year on the back of a record refining margin and a favourable oil price trend. For RIL, the oil refining and marketing segment delivered strong growth. The operating operational profit in these areas increased by 6.5 per cent to a record level of Rs 25,056 crore ($3.9 billion), supported by higher GRM and crude throughput. GRM for the year stood at an eight-year high level of $ 11.0/bbl as against $ 10.8/ bbl in the previous year. In fact, RIL’s gross refining margin outperformed even Singapore’s complex margins by $ 5.2/bbl, the highest premium achieved in the last eight years.
“Our high-conversion refining system was able to take advantage of firm margins on middle distillates and wider discounts on difficult-to-process crudes in a well-supplied market,” Ambani said in his annual address. During the year, our refineries processed 65 different grades of crude including five new grades. This illustrates the flexibility and complexity of our refining assets at Jamnagar which can process heavy and sour crudes to produce high value transportation fuels, he added.
Its petroleum retail operations also continued to gather momentum with 1,221 fuel outlets operational at the end of the year. These outlets are registering industry leading pump throughput, according to RIL.
Data Is The Next Oil
Reliance Jio Infocomm, which launched its low-priced mobile data service and phones in 2017, has already notched up a subscription base of nearly 130 million in India. In January, it launched a multi-prong strategy towards achieving the vision of ‘Digital Freedom’ for the 50 crore feature phone users of India.
“JioPhone users will now enjoy free voice calls and unlimited data (1GB at high speed) for 28 days at a price of only Rs 49. Jio is also introducing affordable data add-ons at Rs 11, 21, 51 and 101,” stated a 25 December statement from the company. As Jio’s network is expected to cover 99 per cent of India’s population this year, 4G coverage will be more than 2G coverage in the country, it predicted.
While India’s new economic experiments sputtered the industrial growth and it grew at a three-year low due to the aftershocks of demonetisation and uncertainties over the rollout of a nation-wide GST, the share market scaled new heights and boosted the net worth of the rich. But, none gained more than Mukesh Ambani.
