Mukesh Ambani's gas pipeline company's net worth erodes by Rs 7,966 crore

Even as Reliance Industries is creating ripples in the telecom industry, the net worth of Mukesh Ambani owned, Reliance Gas and Transportation Infrastructure Ltd (RGTIL) has eroded by a massive Rs 7,966 crore as on September 2016 as low gas supply from RIL’s Krishna Godavari basin hit the pipeline company’s financials. The company owns and operates a 1400 kilometers gas pipeline connecting Krishna Godavari basin to Gujarat and depends on gas production from RIL’s KG basin to earn revenues.

According to Reliance Gas filings, for the financial year 2016 its net worth was negative Rs 2,641 crore (see chart). Reliance Gas said the net worth erosion statement is prepared in compliance with Indian accounting standards and is subject to further transition adjustment as may be required under the Ministry of Corporate Affairs’ guidelines and interpretations.

Reliance Gas, which made profit only once since 2010, said it plans to Rs 4,000 crore by issuing Cumulative Optionally Convertible Preference Shares, the company said on October 25th filings with the stock exchanges.

The funds would help the company to retire its debt which went up to Rs 20,719 crore in the half year ended September in the financial year 2017 as compared to Rs 15,964 crore reported in the same period of last year. Revenues in the first half were down to Rs 446 crore from Rs 540 crore in the same period of last year. Its net loss was Rs 334 crore in the first half of current fiscal as compared to a loss of Rs 614 crore reported in the same period of previous year. The company had earlier undergone a restructuring in which its investment division was transferred to another promoter entity.

RGTIL attributed its falling revenues to continued low level of gas production from the KG-D6 block which led to low volume of gas transportation and its continued losses. It, however, said the long term prospects of the company looks appear better due to favourable E&P policies by the Indian government and expected commissioning of LNG terminals in the East Coast. “The promoters of the company have promised to support the company as and when required,” it said.

In its December quarter’s results, Reliance Industries had said its KG-D6 field produced 0.26 MMBBL of crude oil and 24.4 BCF (billion cubic feet) of natural gas in 3Q FY17, a reduction of 28% and 29% respectively on a year on year basis. The company said fall in oil and gas production was mainly on account of natural decline in the fields though the KG-D6 JV completed one side track at MA field which was put to production in October 2016. The second side track is under progress and is expected to be completed during the March quarter, RIL had said.