Reliance Industries (RIL), which generated a consolidated net profit of Rs 39,880 crore in 2019-20, may save roughly Rs 600 crore annually through the 10 per cent salary cut announced for employees in the hydrocarbon business. The 10 per cent cut is not across the board. Employees earning more than Rs 15 lakh annually will face a 10 per cent salary cut, while the cuts will be 30-50 per cent for senior executives and board members. Chairman Mukesh Ambani has slashed his Rs 15 crore annual salary to nil.
In FY20, the company spent about Rs 6,067 crore as the standalone employee benefit expense. RIL's standalone revenues comprise of refining and petrochemicals businesses. For the company, the standalone employee expense for the March quarter stood at Rs 1,506 crore.
Experts say the savings of the company through a 10 per cent salary cut is quite insignificant as it may come around Rs 600 crore annually, translating into a monthly savings of Rs 50 crore. Leaving most analysts wondering about the rationale of the cut. RIL, which generated a revenue of Rs 6.6 lakh crore in 2019-20, reported market value of Rs 9.3 lakh crore as on Thursday.
At the consolidated level, including Reliance Jio and Reliance Retail, the employee expense of RIL stood at Rs 14,075 crore in 2019-20 as against Rs 12,488 crore in the previous year.
Mukesh Ambani, chairman and managing director of RIL, will forego his entire compensation for the year 2020-21. It was capped at Rs 15 crore for many years. A couple of days ago, Ambani had reclaimed the position of the richest man in Asia from Alibaba's Jack Ma with a total net worth of $51.7 billion. According to the Bloomberg Billionaires Index, Reliance Industries chairman is ahead of Jack Ma by $6.5 billion.
RIL battles low profitability due to reduced fuel consumption amid the nationwide lockdown. However, the company has recently announced the strategic sale of 9.99 per cent stake to Facebook for Rs 54,000 crore. The company has been facing delays in forming agreement with Saudi Aramco to sell 20 per cent stake in its oil and chemicals business for Rs 1 lakh crore.
The company said in its letter to employees, "The Hydrocarbons business has been adversely impacted due to reduction in demand for refined products and petrochemicals. This has of course put pressure on our hydrocarbons business necessitating organisation and cost reduction across all fronts."
RIL has also deferred the annual cash bonus and performance-linked incentives for the year.