Rs. 1,25,000 cr. Is Anil trying to do too much? The jury is out

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By Lalatendu Mishra

All in the family Both brothers are racing each other to raise funds
Photo : Deepak Salvi

UNFAZED BY his drop from third to sixth place in the Forbes magazine’s rankings, Anil Ambani has unveiled mega plans to raise a whopping Rs.50,000 crore. He told shareholders of Reliance Power Ltd on 29 September that the company’s current operational capacity would be 5,000 MW by 2012 and, in three years, 25,000 MW.

The markets, however, did not react, presumably because his claim came around the same time that the rankings — which put elder brother Mukesh on top of the richest Indians list — were published. But as though it didn’t matter to him, Anil, in three back-to-back annual general meetings (AGMs) of his group companies, said he was confident he’d be able to raise Rs. 1,25,000 crore. “This would be the largest fund-raising in the history of India,” he said in what is being billed as his ‘Vision 2015’ statement.

The buzz in Mumbai’s corporate and stock market circles is that Anil is trying hard to outbid, or at least match up to, his elder brother: in other words, overreaching. But his ability to raise the huge sums needed to fund the projects is being questioned. Anil says he aspires to make Reliance Power — comprising its thermal and hydropower and coal mining units — India’s biggest clean power company.

“He (Anil Ambani) has been making such announcements for the past three years. Out of his mega plans, he has only delivered 600 MW. Late entrants like Adani Power and JSW Power are much better off,” says veteran stock analyst SP Tulsian. “For his 25,000 MW capacity by 2015, he would require Rs. 35,000 crore. I have my doubts. I don’t think he can raise so much money and execute the projects on time,” Tulsian told TEHELKA.

Expectedly, old loyalists insist that Anil’s is no pipe dream. Among them, Hemen Kapadia, CEO, Chartpundit, a Mumbai brokerage firm, says, “You really don’t know when this financial wizard will spring a surprise.” There can certainly be no doubt that of all the Reliance-Anil Dhirubhai Ambani Group (R-ADAG) companies, Reliance Power or RPower is the only one that currently has cash in hand. In 2008, the firm had raised Rs. 11,500 crore through an initial public offering. Analysts who spoke to TEHELKA contend that around Rs. 10,000 crore would have gone towards financial closure of 10,000 MW of projects, assuming a debt equity ratio of 75:25. They say as further capacity of 4,000 MW heads for financial closure, RPower will need to pump in Rs. 4,000 crore — and do this fast.

Like Kapadia, Alex K Mathews, head, research, at Geojit BNP Paribas Financial Services Ltd, feels this is well within Anil’s reach. “I am sure that Anil Ambani will keep his promise. India’s power appetite is high and the country would need around 400,000 MW of installed capacity by 2020. The power demand-supply gap in India is 12 percent. RPower’s strategy appears to be perfect,” Mathews says, adding: “The company has the financial muscle, name and experience to achieve the projections on time, which is evident from the completion of the first phase of the Rosa power project ahead of time.”

There is also good news from Reliance Infrastructure Ltd (RInfra), formerly Reliance Energy. Having won the prized Bandra-Worli sea link and the Mumbai metro rail projects, and with interests ranging from power distribution to roads, real estate, special economic zones (SEZs), airports and cement, it has lined up several investment targets. A back-of-the-envelope calculation suggests they would total at least Rs. 60,000 crore: Rs. 2,250 crore in power transmission; Rs. 3,150 crore in road projects; Rs. 4,900 crore in metro rail projects; Rs. 6,500 crore in real estate; Rs. 31,000 crore in SEZs; and Rs. 12,500 crore in cement plants. RInfra spokesperson Ravi Muthreja, however declined to comment, only saying: “We are in a silent period, as we are in the process of raising funds.”

As bright as the RPower outlook is, the projections for R-ADAG’s other firms — Reliance Communications Ltd and Reliance Capital Ltd (RCap) — don’t appear nice. Speaking to shareholders at the RCap AGM, Anil Ambani said the group had revenues of Rs. 46,000 crore, which ensured cash flows of Rs. 11,000 crore and a net profit of Rs. 7,000 crore. But what is not stated is that these figures have dropped sharply from the previous year. And this Ambani junior will need to address fast if he wants to win the doomsayers over to his side, and regain his previous position in the Forbes rankings.


Big Brother Big Money

MUKESH AMBANI is flush with cash. The elder Ambani brother reportedly has cash reserves of Rs. 23,500 crore and is scouting around for buys. For 2009-10, Reliance Industries Ltd (RIL) reported a turnover of Rs. 2,00,400 crore, which earned a cash profit of Rs. 27,933 crore and a net profit of Rs. 16,236 crore.

In the past six months alone, Mukesh Ambani has invested an estimated Rs. 11,000 crore, including Rs. 4,900 crore in acquiring shale gas assets in the US, another Rs. 4,800 crore in buying out Infotel Broadband Services Private Ltd, Rs. 1,050 crore in picking up a stake in the Oberoi Group of Hotels and investing in captain GR Gopinath’s cargo venture, Deccan 360. And still not content, he is now planning to acquire more oil and gas assets overseas. This month, RIL is expected to raise $1 billion ( 4,470 crore) in the biggest dollar-denominated bond sale by a non-bank Indian company.

“Reliance is one of the blue chips in India,” Jack Deino, who oversees about $1.6 billion of emerging-market debt at Invesco Inc in New York and is considering buying the new bonds, told Bloomberg. The offering by RIL boost the country’s international bond sales this year to $5.5 billion, the most since $9.2 billion was raised in the similar period of 2007.

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