RGTIL banks on rising exploration activity at KG basin

Mukesh Ambani-owned pipeline company Reliance Gas Transportation Infrastructure (RGTIL) is banking on rising exploration activity in Krishna Godavari basin, new sources of gas in the west coast, and new liquefied natural gas (LNG) terminals planned in eastern India to help it come out of losses.

Reliance Gas was set up to transport KG-D6 gas from Reliance Industries (RIL)'s gas blocks in east India to gas-based power, fertiliser and steel plants based in western India. However, due to continuous fall in gas production from RIL's blocks, the pipeline company has been making losses since its inception.

The company expects its performance to improve in the medium term due to increased investments by various oil companies, which would use the pipeline to supply gas to customers. Besides, the LNG terminals to be set up by Shell and Gas Authority of India can use the 1,300-km pipeline set up by Reliance Gas. Apart from Reliance, ONGC and GSPC have invested in neighbouring gas blocks in the Krishna-Godavari basin and could use the pipeline for gas supply.

The turnaround plan is important for Reliance Gas as its net worth is eroded due to losses. Ambani had already infused Rs 1,575 crore as equity in 2013. According to analysts, the turnaround will take time as investments in LNG terminals and production from the KG basin gas blocks will take two-to-three years more.

When contacted, an RIL spokesperson declined to comment.

In FY15, the company had taken advantage of the Reserve Bank of India's 5/25 scheme, under which it would repay its principal loan by 2030-31, against the current repayment schedule of next four years. Thanks to the scheme, the company's finance cost fell to Rs 301 crore in the first six months of the current financial year from Rs 347 crore in the year-ago period. The company's debt was Rs 16,047 crore as of September this year.

In spite of low finance costs, for the half-year ended September 2015, the company made a loss of Rs 393 crore compared to a loss of Rs 287 crore in the same period of FY15. Its revenues were Rs 687 crore in the April-September 2015 period, compared to Rs 703 crore a year ago.

The RGTIL pipeline was an important cog in Ambani's gas production and distribution plan.

Two years ago, RGTIL had hived off its investment division as Reliance Industries Holdings Pvt Ltd, another unlisted company that Ambani owns.