Reliance Industries is targeting doubling its market share in fuel retail in the next two to three years as it expands the petrol pump business
Mumbai, May 29, 2017: Reliance Industries Ltd (RIL) is targeting doubling its market share in fuel retail in the next two-three years as it expands the business, two people aware of the plan said. RIL currently has a 5% share of India’s fuel retail market.
“RIL is working on various plans to improve its market share in the fuel retailing segment. It is looking at all the markets it is not currently represented in, and these are areas other than urban markets,” said one of the two officials cited above. This person spoke on condition of anonymity as he is not authorized to speak to the media.
An RIL spokesperson declined to comment on the plan.
RIL, which had a 12% market share in fuel retailing in 2005, saw its share slip to less than 0.5% in 2014, by when it had shut most of its fuel retail outlets due to spiralling crude oil prices.
Further qouted to livemint.com State-owned Indian Oil Corp. Ltd (IOC), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL), managed to sell fuel below production cost thanks to government subsidies, which were not available to private sector fuel retailers.
But after the government deregulated petrol and diesel prices in June 2010 and October 2014, respectively, RIL began reopening its retail outlets in phases, gradually taking its market share to 5%. RIL, Essar Oil and Shell India together have a share of less than 8% of the fuel retail market, analysts say.
RIL spent Rs5,000 crore in setting up 1,470 retail outlets between 2004 an 2006, of which 1,221 are operational. The company plans to reopen the rest of the outlets by the end of the year. RIL holds licences for 5,000 fuel retail outlets.
“RIL might consider a network expansion to 2,500 to 3,000 outlets depending on commercial viability,” analyst Nitin Tiwari of Antique Ltd wrote in a report dated 25 April.
In the year ended March, RIL’s fuel retail revenue rose 60.2% from the previous year to Rs33,765 crore.
“Retail business delivered a strong result where segmental Ebit (earnings before interest and tax) increased by 90% year-on-year to Rs2.4 billion (Rs240 crore) due to higher fuel retail sales during the fourth quarter of the last fiscal,” Sudeep Anand, an analyst at IDBI Capital, wrote in a report dated 25 April.
After announcing its earnings in April, RIL said it was bullish on the fuel retail segment and planned to invest Rs2,500 crore in capital expenditure this fiscal year to expand its network of outlets.
The second person mentioned above said the only hitch in RIL’s plan could be the process of identifying and acquiring land needed to set up outlets.
“Acquiring the land, seeking permission and putting up the outlets take time. Of these, land acquisition is the major issue which RIL is trying to address in the best possible way,” the person said, also on condition of anonymity according to livemint.com.
RIL has 448 company-owned, company-operated outlets, which it plans to increase beyond 500 this fiscal year.
“RIL is primarily a refiner. It not only exports from its twin refineries in Jamnagar but also supplies to fuel retailers domestically,” an analyst from a domestic brokerage who tracks RIL said on condition of anonymity.
“Besides, RIL sold its South African retail venture Gulf Africa Petroleum Corp. this year which was an export market as well as supported its retail business. By virtue of this, it is natural for RIL to expand its retail network in the domestic market,” said the analyst.