The biggest risk to the project is a delay in its commissioning beyond the scheduled December 2008.
There are others with better integration levels in their businesses and deeper pockets planning to set up similar projects closer to the markets in the US and Europe.
Therefore, a late entry for RPL's refinery could mean taking on high-quality competition right from the start.
A repeat of the story with the original Reliance Petroleum whose project was delayed by four full years could prove dangerous for the new RPL.
The original RPL, which was subsequently merged with Reliance Industries in 2002, floated its IPO in September 1993 with a stated plan of commissioning its 9 million tonne capacity refinery by the second quarter of 1996. As it turned out, the refining capacity increased three-fold to 27 million tonnes(further expanded to 33 million tonnes now) but the refinery was commissioned only in the end of 1999.
Of course, it is true that the project was implemented in 36 months because work on the ground began only in 1996. Yet, the fact is that it was delayed compared to the original schedule stated in the offer document of the IPO.
RPL will also be up against some quality competition in the Western markets dominated by multinationals such as ExxonMobil, Royal Dutch/Shell, ChevronTexaco and BPAmoco all of which are well-integrated across the chain from exploration and production to refining and marketing.
The absence of a marketing network could prove to be a handicap for RPL at a time of low refining margins.
There will be some close linkages between RPL and several of its group companies. For a start, the parent company, Reliance Industries, will offer the critical services of crude sourcing and also marketing the refined products.
The experience of Reliance Industries in both these areas will be a strong asset but the corresponding liability could be a clash of interests; according to the offer document, Reliance Industries will offer its services at cost during the implementation and operational phases of the project.
There are also other tie-ups that RPL will have such as for power (with Reliance Utilities and Power), for usage of port and terminal facilities (with Reliance Ports and Terminals) and for civil construction of the refinery (with Reliance Engineering Associates Pvt. Ltd).
These three companies are controlled by the promoters of Reliance Industries and will offer their services on terms similar to what they provide to others in the proposed SEZ, says the offer document.
Reliance Infrastructure, a wholly-owned subsidiary of Reliance Industries, will implement the SEZ.
The principle of arm's length transactions will be of utmost importance given this business structure.
Finally, from the perspective of investors, the track record of the Reliance group in mergers of group companies has to be taken note of.
The original Reliance Petroleum was floated as a separate company that also made its IPO and listed on the market.
Though it was always said that the company would be kept independent, it was eventually merged with Reliance Industries in 2002.
Others such as Reliance Polyethylene Ltd. and Reliance Polypropylene Ltd., which also came out with IPOs in the early-1990s and listed on the market, were also merged with Reliance Industries later.
While there is nothing wrong per se in mergers of group companies so long as they are done on fair terms, those who do not prefer the uncertainty associated with such moves are bound to see this as a risk factor.