Reliance earned $11.50 for every barrel of crude that it processed during the last three months of the calendar year - almost 60 per cent more than a year earlier
Cheap oil gives Mukesh Ambani a licence to keep spending. India's richest man has already splurged $15 billion building a super-fast new mobile network. Investors in Reliance Industries, his flagship retail-to-energy conglomerate, have barely flinched. Now his refineries are enjoying a windfall from low oil prices, the tycoon can easily make a $2.2 billion top-up to his telecom ambitions.
Reliance earned $11.50 for every barrel of crude that it processed during the last three months of the calendar year - almost 60 per cent more than a year earlier. During the period, the refining unit made up more than two-thirds of total operating profit, which rose by almost half.
That's all fuel for Ambani's telecoms venture, Reliance Jio. The unlisted unit which is owned by Reliance Industries has just announced that it will raise a further $2.2 billion by issuing shares to its parent. That will give it more financial flexibility as it gears up for a nationwide launch, expected sometime in the next quarter.
Jio will try to lure subscribers away from rivals by offering more data, with exclusive content, at faster speeds and ultra-competitive prices. To beef up the new network, Ambani has inked a spectrum-sharing deal with his Reliance Communications , run by his brother Anil Ambani.
For Reliance, Jio is an important bet. It accounts for half of Reliance's consolidated net debt of more than $10 billion. But it is not everything: analysts estimate the telecoms unit would account for just 5 to 12 per cent of Reliance's overall hypothetical break-up value.
It is a different story for local rivals like Bharti Airtel and Idea Cellular, which are more focused on telecoms. Concern about the impact that Jio will have on the market has dragged down their share prices by 28 per cent and 37 per cent respectively in six months. India's benchmark Sensex index has lost only 14 per cent of its value over that time. Reliance shares are up 2 per cent.
Reliance's refining bonanza will only add to their worries. Ambani may feel he can be more aggressive with Jio's pricing if his investors are feeling flush.
Una Galani is a Reuters Breakingviews columnist. The opinions expressed are her own.
Photograph: B Mathur/Reuters