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http://www.hindu.com/thehindu/holnus/006200505151054.htm Check this news item in Hindu. Reliance will be investing Rs. 25000 crores to expand the capacity f its 33mt refeinry to 60 mt. Reliance spent almost the same amount (at today prices) for the first 27mt capacity in the 90s. But does this mean than there is no scale advantage and the incremental 27mt will cost the same 25000 cr (at todays prices) like the first 27mt. Reliance ...the company which taught india the meaning of economy of scale wants us to believe that!!
Come on...my calculation says it wont cost more than Rs. 17000 crores (at today prices). Infact the plant was always designed in a fashion that the capacity can be upgraded to 60mt just by "DE-BOTTLENECKING".
Reliance didnt did so earlier because it was having problem selling its produce in absence of retail network and price administration by govt. But now things have changed for better.
I fear this is another ploy of Ambanis to take out money from Reliance and put it in their own pocket....maybe Mukesh will use it to pay off Anil in cash for share in Reliance.
Come on...my calculation says it wont cost more than Rs. 17000 crores (at today prices). Infact the plant was always designed in a fashion that the capacity can be upgraded to 60mt just by "DE-BOTTLENECKING".
Reliance didnt did so earlier because it was having problem selling its produce in absence of retail network and price administration by govt. But now things have changed for better.
I fear this is another ploy of Ambanis to take out money from Reliance and put it in their own pocket....maybe Mukesh will use it to pay off Anil in cash for share in Reliance.
2 comments:
Aren't we forgetting inflation the buying power of a Re. today and in 90's were different. And secondly we have to remember that the initial setup of the project was subsidized by the government as it was being developed in a remote area.
Plus we need to look at the cost break up exactly where the Rs. 15000 crores are being spent. I don’t think institutional investors and FII's are fools to accept this cost without project details.
Hi,
Yes inflation is an inportant factor but considering the technological development increase in cost would be nominal. Consider factors like increased bargaining ower of Reliance due to successful imlplementation of the jamnagar project, learning curve effect etc.
They need not invest much for govt permissions, project research, land sutability studies, consultants fees, port facility, security systems.....
you are not getting the point its like adding 2nd floor to your house (and you have planned initially that soon you will add that floor) ...you need not invest in foundation, land , permits, design, feasibility studies etc...you know the best people who can do the job, you know what it costed last time hence can bargain better now...custom duties on imports have been lowered substantially..
Your confidence in FIIs, FI etc is also misplaced...they only work on excel sheets and dont use their brain...thats why they came up with the same figure again....infact Reliance has officially not mentioned the figure...they are letting the experts make their guess...then they will declare a figure which is marginally lower that what the expert guess and everybody is happy!!
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