Morgan Stanley was a financial advisor for Reliance Industries deal with an international energy giant BP.
Apparently the report states that the plan may be on to investing various business. But among investors and analysts there are major concerns over the how RIL will use their cash flows.
The investments are likely to be in exploration and production (E&P), petrochemicals and shale gas by RIL, according to Morgan Stanley.
The company has divested 30% stake in its oil blocks, this stake has been taken up by BP for US $7.2 billion (over Rs 30,000 crore). There is also some speculation that most of this US $7.2 billion will be invested by RIL.
RIL plans to spend US $10-12 billion (Rs 45,000-54,000 crore) in petrochemicals business over the next five years and a similar amount in its E&P business, Morgan Stanley said.
The report further said RIL was estimated to invest close to US $11 billion (about Rs 50,000 crore) over the life of its three shale gas joint ventures in US, this includes the acquisition costs. Of this, RIL was estimated to invest US $4-6 billion (Rs 18,000-27,000 crore) over the next five years in its three shale gas investments, it added.
During the investor conference in February, RIL had projected investments for about US $25-30 billion (Rs 1,10,000-1,35,000 crore) for the next five years in its various businesses, including energy and telecommunication sectors.
In an investor presentation in April, RIL said that it would pursue both organic and inorganic growth opportunities, it also disclosed an "investment programme of over US $10 billion to cater to domestic market" in petrochemicals.
Analysts of Morgan Stanley are concerned over the three issues – Lack of clarity over the use of cash flows, E&P dampener and lower petrochemical net backs.
The netback is calculated by deducting from the total revenue the entire costs incurred in taking the product to the market. These costs include those associated with import, transportation, production, refining and royalty etc.
Morgan Stanley's report showed a detail study about RIL's investment plans and concerns over the mismatch with cash-flows, along with a disclaimer that it was an advisor to BP on RIL deal.