Owners Pride Neighbours Envy. Yes, this was the slogan of Onida TV 15 years back. Now it applies to Reliance industries Ltd also. In 2012 Reliance industries Ltd is practically a debt-free company. Now it has huge debts from banks and also from creditors. What are the salient points?
First of all, let us know the multiplicity of Reliance Group. For example, the gas pipeline from Kakinada to Jamnagar in Gujarat is not owned by Reliance Industries Ltd. But by another Group company. Similarly, for Reliance Jio the Towers and technology are from other group company.
So one big company gone to public issue and quoted in Bombay Stock Market is supported by other companies which are owned by the promoter.
So it is like this if an Education Society takes lease one building on lease rental basis from the promoter, the rent paid will cover all expenses and profit also for the promoters. The education society gets nominal profit and promoters get more profit by way of huge rents.
Now Reliance Jio has emerged as a market leader in the Telecom sector. All other telecom companies are making way for Jio to reach peak position. Now other telecom companies have to reduce the charges for survival in the Market. BSNL declared just RS.200 approx for one month for unlimited calls and 2GB everyday memory.
Now the biggest corporate competition is in Reliance industries Ltd opening shortly eCommerce business, competition with Amazon and Flipkart, Big Basket, Big Bazar, Dmart etc. Probably by December, the E-commerce business will start by RIL.
If RIL is successful in Retail trade with Ecommerce model of its own style with good planning and packages. Then it will dry out the American companies and local companies also, just like Jio phone. Otherwise, huge loans availed for this Ecommerce business will become a big burden for the company. The Rating Agencies have reduced the company rating as debt increased over the last four years. At present, the company earning is more than sufficient to repay the instalment and interest for existing loans up to March 31, 2019.
For E-commerce business lit of godowns and supply vehicles, lorries bikes and huge manpower and their training are required. It may cost around RS.100,000 crore minimum.
As I wrote earlier in this Facebook columns that the net funds after paying dividends from 2006- 2007 to 2017 are Rs. 262,409.00 crore. For example, the depreciation and net profit for 2015-16 are RS.9,566 crore and RS.27,417 crore, so after paying dividends of RS.3,095 crore to shareholders, the net funds available for the company are RS.33,888 crore. Similarly, in 2006-07 the net funds available for the company after paying dividends is RS.15,318 crore.
Reliance fresh and reliance digital have met with good success. If Reliance Ecommerce business succeeds then more products will come from Reliance Industries Ltd. It becomes a household name. Like Reliance TV, Reliance chappals, Reliance coffee, Reliance Tea, Reliance on food products, Reliance fridge, Reliance almirah etc.
To compete with Reliance, Flipkart and Amazon are linking with more than 30,000 retailers in the top 20 cities from Mumbai to Visakhapatnam for quick door Delivery for clients. Big Basket has started both wholesale business and door delivery to the individual. So in the coming days, we are going to witness a big corporate competition in E-commerce business.
Commerce ministry declared recently that they are strengthening the retail business of the stores owned by Govt for running military Canting shops and start another 1000 shops for the general public. So the competition is going to become tough.
(The Author is a Retired Senior Manager with Corporation bank and the views expressed are his own)