About two weeks ago, when Sarthak Behuria popped into the newly opened Reliance Fresh store in Hyderabad, he was not out shopping for groceries. The chairman and managing director of the Rs 183,000-crore Indian Oil Corporation, the largest retailer of petroleum products in the country, was thinking about his company's plans for a large play in non-fuel retailing.
"We are looking at opportunities in big retail...at the various options and alternatives," he says.
The company, ranked 153rd on the Fortune list, is appointing a consultant to explore the possibilities, as part of an internal due-diligence followed for any new business. Only after he has some clarity on the investments required, the possible partner and the expected returns, will Behuria take the proposal to the board.
At present, the company's initiatives in non-fuel retailing are limited to convenience stores at its pumps. Earlier this month, it tied up with The Future Group (formerly Pantaloon Retail) for setting up retail outlets at its malls, but this falls within the company's core business of fuel retailing.
Even as the company grows its refining and marketing business, it is making inroads into a new core area which promises to significantly add to its profitability ratios -- petrochemicals.
While the first steps into the sector were taken a few years ago at its refineries in Gujarat and Panipat, its largest investment is just playing out in the port town of Paradip on the east coast.
In fact, petrochemicals is where the company intends to put down the largest chunk of the Rs 55,000-crore capex planned in the next five years. The biggest investment -- Rs 26,400 crore -- has been earmarked for a greenfield integrated refinery-cum-petrochemical complex at Paradip.
The refinery will have a capacity of 15 million tonne per annum and will provide the feedstock for the petrochem plant, which will produce paraxylene, polypropylene and styrene. All approvals are in and construction work on the plant has begun. The commissioning is slated sometime in 2010-11.
Petrochem, refining, marketing, prospecting for oil, integration, diversification...these are all words that define another energy giant -- Reliance Industries. Is there a conscious attempt to mimic its strategy?
"We never looked at Reliance when we had this vision of integration," explains Behuria.
Indian Oil has been bidding for and winning blocks in India and overseas and now the company is looking at acquiring a mid-sized exploration company overseas. "We are talking to 2-3 companies," he says.
Forward integration was thought of as a solution to utilise the naphtha from inland refineries like Panipat, Mathura and Gujarat, since the only other option was to move it to the coast and export it.
"When your feedstock is with you, and you have an opportunity to add value, why not consider it," he asks.
The company targets a turnover of $60 billion by 2011-12, from $41 billion today, through organic and inorganic growth.
"We are conscious that we are the largest company in India, and we want growth to continue to remain so," says Behuria, who sees a five-fold jump in revenue to $300 billion by 2030.
The plans have been laid out. Capex has been earmarked. And internal accruals and some debt -- "though the debt equity will not be more than 1:1 (against 0.9:1 today)" -- should see the company retain its numero uno position.
