Dubai: India ’s largest company by market value, Reliance Industries Ltd (RIL), will aggressively pursue acquisitions as part of a new strategy to expand its business, chairman Mukesh Ambani said on Wednesday.
Reliance, a refiner and petrochemical maker, is changing several of its strategies, Ambani, India’s wealthiest man, said at a petrochemical conference in Dubai.
“The first is from an organic growth model to a mix of organic and aggressive acquisitions-led mode of growth,” Ambani said. Reliance wants to tap growing demand for chemicals in Asia, especially China and India, Ambani said. “The centre of economic growth is shifting to Asia,” he said, increasing demand for goods and services.
Chemicals projects are getting larger as the cost of feedstock—linked to oil prices—rises, demanding economies of scale, Ambani said.
Chemical firms will have to develop “super sites” at a cost of $4-5 billion (Rs16,760 crore-19,700 crore) that also integrate with oil refineries, he said. “Energy and feedstock costs for our industry will continue to move in an upward direction.”
Ambani said raising funds to acquire competitors and to build a global petrochemicals business may be “challenging” because of higher energy prices and the subprime credit collapse.
“Raising money for these in today’s environment is challenging,” Ambani said. “In the short run, there will be project delays.” Record profits from refining oil have helped Reliance amass $28 billion (Rs1.1 trillion) in investments that could be used for expansion. Still, near record oil prices have cut refining margins and the best performance in the rupee in more than three decades have eroded Reliance’s profits from overseas.
Reliance debt was 44% of its equity as of 31 March, according to the company’s annual report. The company had long-term borrowings of $4.52 billion, of which 73% was overseas debt with an average maturity of 6.02 years.
‘Bloomberg’ contributed to this story.