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Tuesday, December 13, 2011

RIL - A giant seating on huge cash

I just read a news article in ET that mentions 25 billion dollars of cash pile that RIL has as idle money! It’s a huge cash pile that RIL have and people are certainly interested in knowing how RIL is going to deploy this huge cash for future growth. Does this fact indicate you to buy stocks of RIL?

Expectations from RIL
People are awaiting on announcements from RIL and specially from Mr. Mukesh Ambani about future investments and growth plans but company seems pretty tightlipped about it. ET article tries to explain and analyze the situation. You may read the article on RIL here.

Retail Business
As I have been following RIL andrelated developments for some time now, I can see a few things that I have understood. One of it is Reliance Retail. In Past 4-5 years, RIL has tried different formats of retail businesses such as hyper mart Reliance Retail (Grocery), Reliance Fresh (Veg./fruits), Reliance shoes, Reliance Gold. I have been to all these format stores except Reliance Gold and they had decent setups. These experiments could grow/consolidate further and ultimately become the growth engines for RIL as everyone knows the humongous retail market size of India.
Reliance Retail Subsidiaries
Petroleum Retailing
Another forgotten business from RIL stable is petrol retailing business (petrol pumps) which was in doldrums due to regulated pricing of petrol in India. But now as pricing is being freed slowly from regulations and being tied up with international markets, RIL would be a huge beneficiary of this and I am sure RIL would be preparing for that. Expansion of current refining capacities and addiction of refining business by means of buying out other refining companies globally could be another growth plan of company.

Broadband Internet and Telephony
One more exciting development I read some time back was about RIL setting up Broadband/4G internet capabilities and telecommunication (VOIP) business for which, I believe, RIL has started the preparations. Being a techie, engineer and internet junkie apart from stock market investor, I can imagine what a market size is available for Broadband/high speed internet business in India. RIL could make a big bang in it as Reliance communications did few years back in mobile phones. I believe they are in process of setting up high speed Wifi hubs across the country to facilitate broadband business.

Opinion
RIL must be exploring bunch of opportunities as next growth engines with that huge cash pile, which would eventually happen. Even if it does not happens soon, it huge cash will keep drawing a few thousand crores every year just by means of FD’s/CD’s and MF investments. And this very fact indicates that one should buy stocks of RIL for long term safe capital growth. Feel free to express your thoughts on this.

2 comments:

  1. Being an ex-Reliance employee and investor, i firmly believe that promoters of RIL are shrewd business men and they will not invest cash in hurry. They will look for right business / right opportunity to deploy large cash and today's economic scenario where cash is king, they will get ample opportunities. I am sure that will be in interest of the company and shareholders

    ReplyDelete
  2. I hope they get into some environment friendly activities in future and an image building exercise like Tatas

    ReplyDelete

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