Reliance Industries to Form Possible Petrol Retail JV

 India Oil Company , which is the largest fuel retailer in the country (running more than half of all fuel outlets), and Shell are believed to be the front-runners to pick around 50% stake in the new venture, according to local reports.

Most of these outlets are located on the lucrative Golden Quadrilateral road network on the country’s East-West corridor, where fuel sales are higher. Besides the service stations, the sites have significant land banks which were meant to house hotels, food courts and other commercially exploitable facilities.

Although there was speculation that Reliance may exit the business altogether, for now it is looking at alternate options to revive the business in which it has already invested around $1.4 billion. Moreover, the network of outlets will also help when it sells compressed natural gas in the future. The company continues to make losses in the business due to its committed returns for investments of the franchisees who were roped in to run the outlets.

Reliance has invited bids from a group of Indian and overseas companies including IOC, Shell, BPCL and HPCL, and is open to bring down its holding to as low as 49% giving the strategic partner a majority stake in the venture.

One straight benefit would come from hiving off the assets to a new separate venture as it would then be able to transfer accumulated losses out of its own books.

PetrolWorld March 2009

Editors Note
Reliance has invested huge amounts in the petrol retail sector in recent years and was never really going to exit the market as suggested by some local media.  It is a personal view but I believe this would have looked at and discussed behind closed doors as a natural business process considering Government subsidies to state oil companies and the Government control on fuel prices.  However creating a  joint venture is a much more realistic possibility and I am sure more news on this will be forthcoming.