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Reliance Petroleum

Reliance Petroleum

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Published by: madhav on Dec 08, 2009
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Reliance Petroleum Limited(RPL)
Mission Statement:
Refining Life Redefining Growth.
Goal:
To harness an emerging value creation opportunity in the global refining sector.
About the Company:
1991, Reliance industries set up a new subsidiary, Reliance Refineries Private Ltd. Thesubsidiary later changed its name to Reliance Petroleum Limited, and in 1993 launcheda public offering, which at that time was India's largest ever IPO.Reliance continued to pioneer financing channels in India. In 1993, for example, thecompany became the first Indian company to raise capital on the foreign market,through aGlobal Depositary Receipt(GDR) issue in Luxembourg. The companycompleted a second successful GDR issue in 1994. The company used the new capitalin part to expand its petrochemicals wing, building the world's largest multi-feedcracker at the Hazira site. The company also added production plants for monoethyleneglycol, polyethylene, and purifiedterephthalic acid. The new units launched production in 1998.Reliance's opportunity for entry into petroleum refining came in 1997, when the Indianoil industry reached a state of near collapse. Unable to fund further explorationoperations, and lacking the capital to expand its existing production, the governmentwas forced to liberalize the sector. In that year, Reliance announced a plan to build oneof the world's largest and most modern petroleum refining complexes in Jamnagar,Gujarat, at a cost of some $6 billion. The government agreed to the plan, and grantedthe company the right to import petroleum directly, rather than going through IndianOil, which helped Reliance greatly drive down operating costs.Constructed in record time, the Jamnagar site was commissioned in 1999. The site's production capacity was double that of any other Indian refinery and ranked among thetop five in the world. The addition of the new facility also placed Reliance at the toprank of the country's private-sector companies. In 2002, Reliance Petroleum wasmerged into Reliance Industries, which then became one of the country's top threecompanies, including state-owned entities.
Breaking Up in 2006:
Dhirubhai Ambani died in 2002, and the Ambani brothers took over as heads of thecompany. In that year, the company increased its dominance of the country's petrochemicals sector through its acquisition of main private-sector rival IndianPetrochemicals Corporation. Also in 2002, Reliance launched adiversificationeffort,
 
targeting the telecommunications sector, especially the fast-growing cellular phonemarket. Reliance set up its own phone service, Reliance Infocomm, in that year.Yet the petroleum industry remained the company's major growth focus. In 1999, theIndian government auctioned off 25 blocks for exploration; bids were given in the formof royaltypercentage offers. Reliance won 12 of the blocks and promptly set in placeits own team of exploration experts, backed byoilfieldservices from Halliburton andSchlumberger.Reliance's investment quickly paid off with the discovery of natural gasreserves estimated at some 14trillioncubic feet, the largest natural gas field discoveredin India in decades, in the Krishna-Godavari Basin in the Bay of Bengal. In 2004, thecompany struck again, locating a new gas field in the Bay of Bengal, off the OrissaCoast.Buoyed by its successful exploration efforts, Reliance unveiled an ambitious expansion program for the second half of the 2000s. The company's plans included a $6 billionextension of the Jamnagar site, doubling it in size and making it the world's largest anscomplex refinery by 2009. The company also announced that it intended to spend $10 billion on further oil exploration efforts, targeting the international market. In this way,the company hoped to increase its productiontenfoldby the end of the century. At theother end of the petroleum market, the company launched a $1.5 billion expansion of its Reliance gas station chain, with the goal of 6,000 stations. The company alsoexpanded internationally, becoming the world's leading manufacturer of polyester yarnwith the acquisition of Germany's Trevira. In addition, the company boosted itstelecommunications wing, acquiring U.K.-based FLAG Telecom, an operator of a50,000-kilometer underwater fiber-optic cable network.In the meantime, rising tensions between Mukesh and Anil Ambani came to a head inlate 2005, when a long-simmering disagreement over company strategy broke out intoan open and highly publicized feud. In the end, atrucewas brokered by the brothers'mother, who proposed a breakup of Reliance Industries into two roughly equalcomponents. Mukesh Ambani remained as head of the company's petroleum, petrochemical, and textiles operations, and Anil Ambani regrouped the company'stelecommunications, energy, capital finance, and other operations into a new company.The breakup of the company took place in 2006. As a result, Reliance Industriesemerged as a focused and highly integrated petroleum and petrochemicals challenger tothe global heavyweights.
Employees
:
12,540(in 2006-07)
Employee growth
:
3.5%India and Reliance Industries rely on each other. The company is India's largest petrochemical firm and among the country's largest companies (along with the likes of Indian Oil and the Tata Group). Oil refining and the manufacture of polyolefins(polyethylene, polypropylene, PVC, etc.) account for nearly all of Reliance's sale
 
Principal Subsidiaries:
Reliance Industrial Investments and Holdings Ltd.; Reliance Infrastructure Limited;Reliance Middle East DMCC (U.A.E.); Reliance Netherlands B.V.; Reliance PetroleumLimited; Reliance Retail Limited; Reliance Strategic Investments Limited; RelianceUK Ltd. (50%); Reliance Ventures Ltd.
Principal Competitors:
Indian Oil Corporation Ltd.; Hindustan Petroleum Corporation Ltd.; Bharat PetroleumCorporation Ltd.; Indian Petrochemicals Corporation Ltd.; Mangalore Refinery andPetrochemicals Ltd.; Kochi Refineries Ltd.; Chennai Petroleum Corporation Ltd.;Parker Agrochem Exports Ltd.
Management:
It is headed by Dhirubhai Ambani’s son, ChairmanMukesh Ambani.
Promoters:
Reliance Industries Limited(RIL) owns 70.38% & Chevron India owns 5% of theequity share capital.An offer in 2008 made to Chevron to increase its share in equityshare capital further by 5%.
Corporate rankings:
It featured in the Fortune Global 500 list of ‘World's Largest Corporations' for the fourth consecutive year.
Ranked 269th in 2007 having moved up 73 places from last year.
Featured as one of the world's Top 200 companies in terms of Profits.
Featured among top 50 companies with the biggest increase in Revenues.
In September,2008 it was the only Indian Company which was featured inforbes top 100 list.
RELIANCE AND THE INDIAN PETROCHEMICAL MARKET
Reliance Industries is one of India's biggest industrial groupings and the largest privatesector company. Reliance built its first polymer cracker in 1992 because althoughnatural gas is cleaner and cheaper, India has a very limited supply.Reliance, which is pursuing an aggressive investment strategy in Jamnager, is also oneof the prime contenders to take over part of the state-owned Indian PetrochemicalsCorporation Ltd (IPCL) when it is privatised. Reliance could exploit major synergieswith the state-owned giant. The Indian government might also be concerned at the near monopoly that would be granted on polypropylene and polyethylene. Therefore, anydisinvestment to Reliance would have to look long and hard at the competitionimplications.

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