For Reliance, buyout is the buzzword in the growth path

MUMBAI: Reliance Industries (RIL) will lay more emphasis on buyouts, partnerships and agriculture sector in future while continuing to pump in more funds to boost capacities in key business areas, chairman Mukesh Ambani said on Friday.

In the first clear-cut enunciation of a strategic shift taking place inside the Rs 1,18,000-crore giant, Mr Ambani said the company cannot afford to continue its policy of organic growth and full ownership with a heavy focus on the industrial sector.

This approach, according to him, is not feasible in an intensely competitive environment where technology is leading to product innovations, and access may not be easily available to all product categories.

Industrial and services sectors have boosted growth in the past, but rural and agriculture sectors offer huge opportunities in a country like India, he stressed.

“There are five fundamental strategic shifts taking place in Reliance,” Mr Ambani told shareholders, while going on to list inorganic growth, partnerships, foray into agri and rural sectors, innovation and building sustainable growth as pillars of future gameplan.

The change is a significant one for the Dhirubhai Ambani-founded company, which has prided itself on building assets from scratch and going alone in most of its key ventures whether it is petroleum refining, oil and gas exploration or retail. World-scale assets were built single-handedly by licensing technology from global majors.

The company, then, leveraged its financial resource to set up mega-capacity units and hired the best in the industry to manage them. It shied away from partnerships, wary of ceding control and sharing profits. Almost all its acquisitions were distressed assets and the deals were at a significant discount.

“Traditionally, Reliance has grown by building businesses from scratch. This strategy cannot entirely drive growth in an era of intensive global competitiveness, rapid technological change and limited window of market opportunities,” Mr Ambani said. “The second shift is from full ownership to both partnership and full ownership... With globalisation and the constant quest for new initiatives, this approach may be inadequate across all product, market and technology contexts.”

Reliance, he said, would focus on agriculture and rural areas and work with farmers to create economic opportunities. At the same time, it will continue to spend heavily in its key core industrial businesses.

About $12 billion (Rs 48,000 crore) will be spent in refining, petrochemicals and exploration and production (E&P) over the next four years to step up capacity. The capacity of paraxylene, a key input in the polyester industry, will go up from 1.8 million tonnes (MT) to 4.5 MT. This will make it the biggest paraxylene producer in the world, ahead of Exxon Mobil with 3.39 MT and British Petroleum with 3.05 MT.