Mumbai: Mukesh Ambani’s Reliance Industries, unfettered by a pact that banned it from competing with his brother’s firms, announced an aggressive push into the power business but was short on specifics during a hotly anticipated shareholders meeting.
The elder Ambani has unveiled deals since the long-estranged brothers called a truce last month in their feud, and said the end of the non-competition agreement opens up possibilities in a power sector that he said provides “unbounded opportunity.”
Investors were disappointed, however, that Ambani, the world’s fourth-richest man, did not unveil more specific plans, and that his younger brother Anil was not in attendance.
“People had built unrealistic expectations that there would be big-bang announcements at the meeting,” said Tejas Doshi, head of research at Sushil Finance in Mumbai.
“The disappointment is showing in the stock price of the companies led by both Ambani brothers,” he said.
Reliance shares, which had gained as much as 1.7% early on Friday, were down by 0.41% after the meeting, while Anil Ambani’s Reliance Communications and Reliance Natural Resources Ltd also skidded.
Ambani said the company had entered a new era of growth.
Reliance recently made a dramatic return to the telecom business with a deal to pay $1 billion for Infotel Broadband, the only company to win a nationwide licence of broadband wireless spectrum in a government auction. Reliance is also keen to enter the financial and health sectors, according to newspaper reports.
Ambani unveiled plans to build its presence in the shale gas business in the United States and build a coke gasification facility in India, and an expansion of its retail business.
“It took three decades for Reliance to create an enterprise value of over $80 billion. However, I feel hopeful and confident that Reliance can accomplish value creation of a similar magnitude in less than a decade,” he said.
Exactly five years ago, the two brothers split the business empire founded by their father Dhirubhai Ambani in a deal brokered by their mother after disagreements over ownership. The non-compete pact had been a source of acrimony between the two.
The two were not on speaking terms, even though they live with their mother in the same building. Mukesh Ambani, however, is building a $1 billion, 27-floor home in Mumbai.
Brotherly harmony, but no investment
Ambani said he looked forward to a constructive relationship with his brother’s Reliance ADAG group, and was ready to provide it natural gas after prevailing in May in a Supreme Court dispute over the terms of a gas supply agreement.
Shares in Anil Ambani’s Reliance Natural Resources lost more than 7% after Mukesh Ambani did not provide details on a renegotiated gas supply deal, which is due this week.
Anil Ambani’s debt-strapped Reliance Communications, which is trying to sell a 26% stake in itself as well as spin-off its tower business, were down about 2% after the meeting. On Friday, a newspaper reported that Reliance was in advanced talks to buy the fibre optic cables and telecoms tower business from Reliance Communications.
Jagannadham Thunuguntla, head of equity at SMC Capitals, said Reliance was entering a period of heavy investment.
Reliance has nearly Rs21,900 crore ($4.7 billion) in cash. “I expect them to do a series of treasury share sales in the next six to eight months. So easily you are talking about $7 billion to $7.5 billion in ammunition,” Thunuguntla said.
India is chronically short of power, and scrapping the non-compete pact means Reliance is now free to build electricity generation except for merchant power based on natural gas.
“We are drawing up specific plans for mega investments in the sector with clean coal-based power generation projects, hydel projects and also in nuclear power as and when it is opened up,” Ambani said.
The Indian power sector, beset by a peak power deficit of 12%, has struggled to attract foreign investment.
“We are also focused on alternative energy domains with priority on solar power,” Ambani told shareholders after arriving at the meeting with his wife Nita and mother Kokilaben.