RIL plans to invest Rs 35,000 cr in FY15 after strong Q1 performance

Mumbai: Reliance Industries, which became the first private company to post close to $1 billion net profit in a quarter, plans to invest Rs 35,000 crore this fiscal.

“We spent Rs 8,000 crore in Q1. It should take us to Rs 35,000 crore capex in this year,” said Alok Agarwal, Chief Financial Officer of Reliance Industries Ltd (RIL).

He said Q1 profit jumped by 13.7 percent to Rs 5,957 crore on account of strong performance of the refining segment and significant contribution from shale and retail segments, which have now become a part of consolidated balance sheet.

“The results basically reflect mid-cycle performance of refining and petrochemical businesses,” he said.

Domestic oil and gas production, he said, was a tad lower than previous quarter. On retail business, he said, RIL had growth in revenue and margins are improving every quarter.

“Revenue growth would have been higher except for the fact that we did little bit of store rationalisation, improved margins, getting in to new location. We are happy with the way the business is showing quarter after quarter,” he said.

On depreciation, he said, “Under the Companies Act, there is alignment of depreciation with useful economic life of assets and because of that we had a lower depreciation charge in the quarter. It was roughly Rs 200 crore lower than the previous quarter.”

RIL’s interest payout was lower at Rs 505 crore in April- June against Rs 938 crore in the same period last year mainly due to lower translation impact with stability in rupee.

“The interest cost is sharply lower relatively to the previous quarter and that is again the reflection of the fact that we have had steady rupee in the past quarter.

“As virtually all our borrowings are dollar denominated and any depreciation of the rupee ended up being reflected through interest cost which is not there in this quarter.”

Having done better than Asian peers on refining margins, he said refining hopefully will improve in the later part.

Asked if the company will be able to maintain the 20 percent growth rate from shale gas business in the US, he said, “This is purely a function of the drilling programme. The drilling programme for the next two quarters is very similar to the drilling program for the first two quarters.”

RIL is currently getting 30-40 cents lower than average Henry Hub price of about USD 4.5 per million British thermal unit in the last quarter.

Asked if the company is planning to park its cash surplus in instruments other than fixed maturity plans (FMPs), he said, “Unless things change, whatever maturity come up we have to move them in other avenues like short-term bank deposits, CDs directly rather than through FMPs. FMP was attractive but with these changes it will mean that attractiveness goes down.”

The company’s investment is around Rs 20,000-30,000 crore in FMPs and mutual funds.

PTI

_Disclosure: Network 18, which publishes Firstpost and Firstbiz, is now part of the Reliance Group
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