RIL will invest Rs1.5 lakh crore in next 3 years

Mumbai: Reliance Industries (RIL) has lined up an investment of Rs 1.5 lakh crore over the next three years across its business from oil and gas to petrochemicals and from retail to telecommunications, making it the largest capital investment in India by any enterprise.

Although the RIL chairman did not give a break-up of the proposed investments, RIL will, on an average, invest Rs 50,000 crore each year, Rs 4,166 crore a month and Rs 139 crore everyday for the next three years against its earlier investment commitment of Rs 20,000 crore each year for five years. In its AGM last year, RIL chairman Mukesh Ambani had proposed an investment of Rs 1 lakh crore over the next five years.

To put things in perspective, the amount of this proposed investment is equivalent to the Rs 1,50,000 crore worth projects stuck in the road and steel sector alone and is 30% of the Rs 5 lakh crore of projects that are languishing in the power sector.

Unveiling the capital investment outlay at RIL's 39th annual general meeting (AGM) in Mumbai on Thursday, Ambani said, "RIL is making huge investments at a time of global economic slowdown. Investment in manufacturing and retail will spur growth. The most important need for India today is employment creation through investments in manufacturing, infrastructure, energy, services, agriculture and the rural economy. Based on our strong faith in the potential of India, we are currently making investments in excess of Rs 1,50,000 crore over the next 3 years."

However, the stock market didn't share the same excitement on its investment plans as RIL shares closed 1% down at Rs 792 in a weak Mumbai market.

"Most economies are faced with slowdown, high unemployment and the lack of visible growth triggers," Ambani said, adding that the company had the conviction to look beyond the cycle and make investments at this time. He also said it was their belief that new projects will come on-stream as the global economy recovered and margins in its core businesses were on the upswing.

Not all analysts are impressed though. "Assuming that RIL cash flows are Rs 25,000 crore for this year, Rs 30,000 crore for next year and Rs 40,000 crore the year after, it will still have to borrow Rs 55,000 crore for this capex. Then how can you say that you are free of debt on net basis? Also, if you take a debt of Rs 55,000 crore, RIL's interest income will reduce considerably," said investment advisor S P Tulsian.

According to analysts' estimates, RIL is investing $12 billion (Rs 68,400 crore) in its mega petrochemicals complex in Jamnagar, $5.2 billion (Rs 29,600 crore) in exploration with BP Plc. RIL has already invested over $3 billion in Reliance Jio and will spend a similar amount for its full-fledged roll out. The balance of about $4 billion is expected to be put into Reliance Retail and international ventures like shale gas in US among others.