Financial Daily from THE HINDU group of publications
Wednesday, Feb 02, 2005
Export-led strategy to help Reliance take on global majors
Mumbai , Feb. 1
RELIANCE Industries Ltd (RIL) is on a makeover from the `import substitution' mantra that was the core to its strategy all these years to a genuinely export-led strategy.
The identification of this new growth engine has begun to show results with exports in the first nine months of the fiscal touching $3.7 billion (Rs 16,200 crore).
According to Reliance, it is on course to close this fiscal with exports in excess of $5 billion (Rs 22,500 crore). This would represent 25 per cent of the company's projected turnover of Rs 90,000 crore, translating to 7 per cent of the country's total exports of $71 billion for 2004-05.
Says Mr Mukesh Ambani, Chairman and Managing Director, RIL: "Rising export revenues are one manifestation of the globalisation of Reliance. The acquisition of Trevira Fibres, Germany, in the polyester business, Flag Telecom, UK, in the infocomm business and participation in oil and gas exploration activities in Yemen and Oman are other expressions. Together, they are pointers to a greater global play in future."
That is not all as Reliance is looking to raise the export bar in the next couple of years to over 30 per cent of its sales. Says Mr Nikhil Meswani, Executive Director, RIL,
"There is a fundamental shift in Reliance from exporting on an opportunistic basis, taking advantage of a specific product-market context to exporting as an integral part of corporate growth strategy. Exports not only validate our international competitive position, but also open new avenues for sustained growth and profitability of Reliance."
Such new avenues accounted for the Trevira purchase last year. Then there was the China foray. With China importing about a third of polymers traded globally, Reliance simply could not have ignored the country.
Its Shanghai office opened in November 2001 and barely three years later, the company has chalked out sales of $600 million. The company is looking to cross $1 billion from China sales by 2007, according to Mr Meswani. Analysts say the spurt in exports can be attributed to reduced dependence on bulk sales to PSU oil companies. Reliance agrees, but says it has turned the situation to its advantage.
Exploiting product deficit in the US, the UK and other developed countries was the beginning. Now, it sells petroleum products to Saudi Arabia, Iran and Kuwait. Clearly, Reliance has outgrown domestic competition and may need to benchmark against global giants.
Overseas manufacturing bases on cards
FOR Reliance Industries, in the coming days overseas acquisitions and grassroots manufacturing bases abroad could go hand in hand.
With a number of Indian companies many of them consumers of RIL products setting shop in China, Reliance could be looking at setting up manufacturing base there. It is possible, but only if there is sufficient critical mass, said Mr Nikhil Meswani, Executive Director, RIL.
"We are considering manufacturing bases abroad as the next step in our evolution as a truly global company. This could come by way of more acquisitions along the lines of Trevira or grassroots projects that will cater to overseas customers. Or it could be value-additions that will be done abroad with Indian customers in mind," Mr Meswani said.
With exports to 97 countries and offices in 14 countries, Reliance is now looking for a foothold in East Europe. Having set a trend in eliminating containers through `break bulk movement' from Gujarat to Chinese towns of Huangpu and Ningbo, some of the east European cities could be the next ports of call as the Reliance export juggernaut rolls on.
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