Reliance Industries Ltd in....what to do??? management is in doubt...

Unlike others in the oil business,RIL the india largest private company isn’t running short of cash. The company is facing the issue how to use the cash to diversify the business and maintain growth in future.

In the last one year, RIL doubled refining capacities and added one of the world’s largest gas facilities.RIL worked three years to simultaneously implement two of India’s largest and most complex hydrocarbon projects the 580,000 bpd second refinery at Jamnagar and gas production from the company’s deep water oil fields in the Krishna-Godavari (KG) Basin.

The company deployed USD 12 billion and kept a few hundred variables on a tight leash that could have derailed the project. Goldman Sachs reckons over the next couple of years, RIL will generate USD 25 billion in excess cash.

Then there’s another Rs 9,500 crore it is sitting on after sale of treasury stock over the last six months and having 13 crore more treasury stock which will be sold before march 2011. What will he do with all this money?

From another perspective, margins in the core operation are down to half of what they used to be earlier. To that point, in spite of the doubling up of capacities, company’s earnings are stagnant. How can he therefore deploy this money in resourceful ways to ensure the growth engine doesn’t slow down?

“The low debt equity and increased pressure will led to the psychological pressures on Reliance to do something with the money,”

Attempts to tackle these questions led to answers like retail and real estate through the special economic zone route. By all accounts though, both of these projects where Ambani invested Rs. 500 crore and Rs. 2,000 crore, respectively, haven’t quite taken off.

The recent settlement between ambani brother has opened the new avenue for ultra-power project and telecom foray for the company so they can use their cash in effective manner to get the goal of growth.

All pointers are he’s selected to take his foot off both and focus on the core work of the company.

Unfortunately for RIL, soon after it pitched for LyondellBassel, Apollo Management, a private equity firm, got into the game and upped the ante by offering USD 15 billion. On his part, Ambani was unwilling to offer anything more than USD 14.5 billion.

So, just what are the options in front of RIL?

Option 1: Emphasis on becoming an integrated oil major and ultimately aim for breaking into a league now occupied by the six biggest in the world (derisively called Big Oil).

Though it prides itself on being integrated, RIL does not have the equilibrium of upstream oil exploration, production and refining capabilities the majors have.

There are big gaps in terms of exposure to key oil and gas basins, that are vital and need to be filled and Reliance is better positioned than any other Indian oil and gas company to get there

Option 2: Become bigger petrochemicals and refining player, with increased global company, through acquisitions and buy out and what they are doing it.

Let see what management is stock market is also watching and investors are aloso in doubt as the company is doubtful market is giving price to the above doubt and share price of the company is not doing anything since last year .