Why Mukesh Ambani's private firms are in the slow lane

Net worth of Reliance Gas erodes by Rs 1,900 crore; port, power firms report lower profits

Mukesh Ambani’s private companies, operating in the gas transport, power and port sectors, moved into the slow lane in financial year 2015-16 (FY16).

This was mainly because of a slowdown in gas production in the Krishna Godavari basin, and increased provisions for redemption of preference shares and debentures.

According to statistics submitted to stock exchanges, Reliance Gas Transportation Infrastructure reported a loss of Rs 538 crore (Rs 5.38 billion) in FY16 compared to a loss of Rs 436 crore (rs 4.36 billion) a year ago.

The company had received a loan restructuring package from banks under the 5/25 scheme last year for its debt worth Rs 16,000 crore (Rs 160 billion).

Under the scheme, banks are allowed to extend the repayment schedule of loans to 25 years with an option to refinance them at the end of five years.

Falling gas production from the KG basin eroded the company’s net worth by Rs 1,891 crore (Rs 18.91 billion).

It earned five per cent less revenue in the FY16 at Rs 1,295 crore (Rs 12.95 billion).

When contacted, an official spokesperson of Reliance Industries declined to comment.

RGTIL expects better performance in the long run because of the commissioning of liquefied natural gas terminals and an increase in gas production, it informed bondholders.

The Ambanis have promised to invest more equity in the company, which constructed a 1,386-km gas pipeline from the east coast of India to Gujarat to supply industries based in west coast.

However, sales and profit fell in line with RIL’s gas production.

The company’s finance costs fell to Rs 571 crore (Rs 5.71 billion) from Rs 657 crore (Rs 6.57 billion) as on March 2015, thanks to the 5/25 scheme.

At present, RGTIL charges its customers according to the tariff fixed by the Petroleum and Natural Gas Regulatory Board and has made provisions for Rs 2,515 crore (Rs 25.15 billion) of revenues for the period April 1, 2009 to March 31, 2015, which is the difference between the provisional tariff and final tariff that is yet to be cleared by PNGRB.

This will be recovered from future bills of gas transport from its customers after PNGRB clears the tariff, the company said.

While RGTIL is making losses, Ambani’s power and port companies earned good profits.

However, as they had to make provisions for redemption of preference shares and debentures, both companies reported lower profits.

Reliance Ports and Terminals made a profit of Rs 55 crore (Rs 550 million) as compared to a profit of Rs 472 crore (Rs 4.72 billion) in FY15.

The company reported revenues of Rs 3,792 crore (Rs 37.92 billion) in FY16 as compared to Rs 3,653 crore (Rs 36.53 billion) in FY15.

Reliance Power and Utilities made a profit of Rs 31 crore (Rs 310 million), down 16 per cent compared to the previous year.

Its revenues were Rs 1,741 crore (Rs 17.41 billion), up 7.5 per cent as compared to Rs 1,620 crore (Rs 16.2 billion) in FY15.

Both Reliance port and power companies cater to the demand of RIL’s Jamnagar refinery.

Image: Mukesh Ambani. Phtotograph: Reuters