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Reliance Jio gearing up for 4G launch with massive investments
With a CapEx cycle drawing to a close in the next 12 months, Reliance Industries is expected to achieve a significant rise in its return ratios in the medium term. This is owing to the expansion in core business earnings and its long-term strategizing in telecommunications. Reliance Jio, the telecom venture of RIL is expected to receive further investments by FY17.
Developments in Core Business

The consolidated Return on Average Capital Employed (RoACE) for FY2015 is at 7%. On excluding the Work in Progress (WIP), capital of USD 28 billion and cash investments worth USD 14 billion, the RoACE rises to an impressive 13%. This includes the business RoACE on retail and US shale. These along with the rise in refining and petchem margins account for the RoACE of 13% which shows a considerable rise from that of 11% in FY14.

According to a release Reliance Industries aims to generate a significant growth of 57% in its EBITDA and CRoCI (Cash Return on Cash Invested) of 14% for the FY2018. Accordingly, massive investments amounting to USD 17 are to be made in the core-business by FY2017.

Low crude prices may render core projects less attractive due to reduced benefits in petchem projects. But this may not affect complex refiners like Reliance as it is balanced by the improved core benefits resulting from a low LNG price.

High Investments in Telecom

The investments in telecom are expected to be equally high with estimated total investments of USD 17 billion by FY2017. These include Reliance Jio's reported assets of USD 13 billion for FY 2015, spectrum liability of USD 1.1 billion obtained in 2015 along with incremental investments of $ 3 billion. The launch of Reliance Jio's 4G services is expected in August, in order to fulfill the roll-out obligations stated by the Department of Telecom.

With the acquisition of Infotel Broadband Services in 2010 and further spectrum in 800MHz and 1800MHz bands, RIL is now the largest owner of liberalized spectrum in India. With its rational strategy in telecom, Reliance Jio is gearing for the launch of its 4G services, with an expected expenditure of Rs. 70,000 crore.

The annual report for this year announces that the services will be accessible to 22 billion mobile phone number across the country, in the initial phase. This will be accompanied by a roll-out of physical infrastructure in 880 cities.

Infrastructural Projects

The company has also shown optimism regarding the development of its petcoke gasification project. The resulting gas produced from this petcoke project will be a cost-effective substitute to LNG imported from abroad. This is expected to significantly lower the expenditure on energy and hydrogen for the refineries. Reliance has commented on the expansion of its petchem projects, stating that the progress is on track.

The company has undertaken projects for increasing capacity in its ethylene and polyester chains. These will be commissioned over the coming year in a phased manner. The company's project at Jamnagar, an off-gas cracker, has been reported to be in advanced stages of completion. Using off-gases as feedstock, the project is expected to generate ethylene and propylene weighing 1.4 million tons and 1.2 million tons respectively.

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