Archive for May, 2010

Mukesh Ambani may enter telecom business with Idea, Videocon

May 31, 2010

Four years ago, the Ambani brothers parted ways dividing the Reliance Group into two with a promise they won’t compete against each other. In that partition, Anil Ambani walked away with Reliance Communications (RCOM), today the second-largest telecom company in India, which was incubated by elder brother Mukesh. Amid speculation that Mukesh may now want to re-enter the business, analysts said Idea may be ideal. As the Idea commercial says, ‘What an Idea, Sirji’.

Last week, the brothers annulled their no-compete agreement for all businesses, excluding gas-based power generation. The move opens oil exploration and refining to Anil, while power, financial services and telecommunications become available for the elder Ambani.

It is not clear whether Mukesh will enter the telecom business, or how. There is no publicly available information that any deal is in the works. ET spoke to a number of analysts to figure out the possible options before him.

“If Idea is available, RIL could get interested in re-entering the business,” said Gaurav Dua, head research, Sharekhan. “I have my doubts that RIL may enter the business to build it from scratch.”

Aditya Birla Group-owned Idea Cellular is the third-largest GSM service operator with 15%, or 65.3-million subscribers, as of April-end. It recently won third-generation, or 3G, bandwidth in 11 service areas, for a sum of Rs 5,769 crore.

The company also has an identity that is independent of the Reliance brand, which is currently associated with RCOM, the flagship company of Anil Dhirubhai Ambani Group (ADAG). It has often been said that Idea may be sold, given the right price, but what that is, only a few hazard a guess. Idea sold a stake to Axiata, formerly Telekom Malaysia, at around Rs 157 a share in June 2008. The stock is currently trading at Rs 50.

Axiata currently holds around 23% in Idea, 47% is held by promoters, while the rest is with institutional and retail investors.


Mukesh Ambani attents PM’s Council of Trade and Industry meet

May 26, 2010

The Prime Minister’s Council on Trade and Industry comprising top industrialists and bankers met on Wednesday and reviewed the economic situation, particularly in the wake of the European financial crisis.

Chaired by Prime Minister Manmohan Singh, the meeting was attended by Finance Minister Pranab Mukherjee, Commerce and Industry Minister Anand Sharma.

Industrialists Ratan Tata , Mukesh Ambani and Sunil Mittal , and banker Chanda Kochhar attended the meeting.

The council is believed to have discussed the possible impact of the European financial crisis on the Indian economy, which is projected to grow by 8.5 per cent in the current fiscal.

On Monday, the Prime Minister had emphasised the need for giving a boost to the manufacturing sector for achieving a gross domestic growth of 10 per cent in the medium term.

The Trade and Economic Relations Committee was constituted on 3 May 2005 to enhance India’s economic relations with other countries in a coordinated manner.


Reliance Industries makes rare purchase of Urals crude

May 21, 2010

India’s Reliance Industries, which runs the world’s biggest refining complex, made a rare purchase of Russian Urals crude for July-loading, as the arbitrage window for Western cargoes remains open, trade sources said yesterday.

Reliance bought one Very Large Crude Carrier (VLCC), or 2.0 million barrels of Urals from oil trader Gunvor, the sources said.

The company also purchased the Urals cargo in April, they said, nearly a year after its last purchase of the medium-sour crude.

Reliance’s daily crude oil purchases rose 42 percent in April from March, when it also bought Australian heavy crude Pyrenees for the first time.

Since the startup of the new plant in December 2008, Reliance has been diversifying its crude slate, making several new and rare purchases, capitalising on the complexity of its plants that allow it to improve margins by processing heavy grades.

Reliance, which runs the refining complex at Jamnagar in western Gujarat state, imported nearly 1.42 million barrels per day (bpd) of crude last month, up from 998,350 bpd in March and from 945,100 bpd a year ago, data showed yesterday.

“It appears Reliance is making up for Iran crude shortfall and looking at diverse sources. Its crude from the Middle East, especially from Saudi Arabia has come down,” said a trade source.

Reliance has not renewed a contract to import crude oil from Iran for financial year 2010, industry sources have said.

Narrowing Brent/Dubai Exchange of Futures for Swaps (EFS) also offered opportunities for flows from Europe and West Africa to Asia, the sources said, a trend reflected in Reliance’s crude purchases.

Front-month EFS for July was valued at around 50 cents a barrel this week, down from the May EFS which jumped to $2.50 a barrel in mid-March, the highest level since December 2008 when Opec producers began record supply curbs.

“The arbitrage window for Western cargoes, such as Urals, to Asia remains open,” said a trader with a East Asia refiner. “It may not be that wide open for East Asia at the current prices, but India is half way, marking it more economical.”

Urals was valued at a premium of around $1 a barrel to Dubai to East Asia on a cost-insurance-freight basis, the trader added.

The prices were competitive to rival Oman crude, whose value was assessed at a 50-cent discount to Dubai on the Dubai Mercantile Exchange.

Refiners and traders were reluctant to take July Oman cargoes, saying the prices were too expensive compared with other medium and heavy crudes after values of benchmark Dubai crude was pushed up in the past two months.

More Urals cargoes are offered to Asian buyers, including Japan and Taiwan refiners, they said.


Mukesh Ambani’s Reliance Retail going global, brings international brands to India

May 14, 2010

Five years after planning to bring most luxury brands into India, Mukesh Ambani is finally walking the talk.

No wonder after opening Hamleys and Diesel stores in the last two months, Reliance Retail is now in talks with US fashion brand Kenneth Cole and Italian bag maker Mandarina Duck to open their exclusive outlets in India.

Dheeraj Dogra, CMO of Express Infrastructure, said, “Reliance has signed up with Timberland, Diesel, Zegna, a number of international brands and last we heard it is also in talks with Kenneth Cole.”
That’s almost half a dozen international brands in Reliance kitty so far.

But now, the company wants to expand further. However, experts say it will take a while for these brands to mop up enough revenues.

Susil Dungarwal, Founder of Squarefeet Management, said, “These brands will not contribute significantly on its topline or bottom line, even if they sign with ten brands, not at least in the next five years.”

So this changing focus, experts feel, is because even its cash cow, food and grocery retailing, isn’t performing as per expectations.

That’s precisely why Reliance wants to focus on international brands like these, especially when the segment is less competitive and can offer much higher margins than its other formats.


Ambani Gas Row: Government emerges triumphant!

May 7, 2010

Two judges of a three-member bench delivered separate verdicts on the ongoing Ambani gas row between Mukesh Ambani’s Reliance Industries and younger brother Anil’s Reliance Natural Resources. The case involves terms of a deal under which Reliance Industries was to supply Anil Ambani’s Reliance Natural with 28 million standard cubic metres a day (mmscmd) of gas for 17 years at a rate below the government price.

Reliance Industries CMD, Mukesh Ambani had argued the private deal cannot take precedence over government policy, which determines who can receive gas and at what price.

RNRL’s Anil Ambani, who claimed otherwise, rolled out a series of front-page advertisements in major newspapers accusing the government of taking the side of Reliance Industries.

Agreeing with RIL’s argument, the Chief Justice of India issued a final verdict that said a memorandum of understanding between the two brothers signed in 2005 is not binding on RIL, a government contract over-rides all private agreements. SC has asked both brothers to sit down and re-negotiate the gas supply master agreement (GSMA) and then come back to the Court in 6 weeks. The verdict further said that gas is a national asset and belongs to the government till delivered to the consumer. The court said it will give its direction in 8 weeks.

The verdict means that the re-negotiation has to take place within the ambit of the government’s policy. Further the judgement adds that the government regulation must dictate the renegotiation plan and RIL and RNRL should renegotiate under government rules.

Minutes after the Supreme Court declared the verdict in favour of RIL, in the Ambani Gas Row, Oil Minister Murli Deora welcomed the move and called it a vindication of the Govt’s stand. “The Govt is satisfied with the verdict. The Govt has the power to decide the price of gas and the power to allocate.”

Oil Secy S Sundareshan added, “Right from the beginning, the Ministry has been saying that gas is the property of the nation, and we believe the court has upheld the terms of the Production Sharing Contract.”

“Now there is complete clarity on gas policy and the decision of the Bombay High Court has been quashed. We will continue to regulate gas pricing and policy in future.” However, he also said that he was unaware of what has to be renegotiated in the case.


Mukesh Ambani sees an Indian Century Ahead

May 5, 2010

29th March 2010 saw the Chairman of the largest private sector company in India, Reliance Industries Ltd., the flagship concern of the Reliance Group, passing on his pearls of wisdom to the next generation of powers-that-be graduating from an institute declared to be among the top business schools in the world. The occasion was the 35th convocation ceremony of the Indian Institute of Management, Bangalore (IIMB) and business tycoon and proud alumnus, Mukesh Ambani, graced the occasion with his Chairman’s Address.

Mukesh Ambani observed that the world is emerging from a severe economic shock and resetting itself to face newer economic realities with India being one of the first countries to recover. This fact confirmed his belief that the economic centre of gravity is slowly shifting to Asia and the 21st century is poised to be an Indian one.

Mukesh Ambani believes that currently, opportunities are many and must be seized effectively and in time. Leadership in all walks of life is the only way to achieve this goal. Fervently, he told his eager audience that they were graduating at the most appropriate time for shaping a new and resurgent India as the power of youth will be centric to the chiseling of the country’s future. However, he also cautioned that the competition for Indian graduates will be more and more global as an increasing number of professionals from other countries are aspiring to work here.

He reminisced that when he graudated from IIMB thirty years ago and entered the economy, the opportunities before him were not even a fraction of what each of the students present had before him. He pointed out that these students were the privileged ones to be part of this new and fascinating India. “A new brave world lies ahead of you. For that we have to be fearless and take on the world,” were his motivating words.

The CMD of Reliance Group, Mukesh Ambani eulogized India’s space and technology endeavors. Quoting India’s first Prime Minister, Pandit Jawaharlal Nehru, he said, “The future belongs to science and to those who make friends with science”. He spoke extensively on how the country’s space and technology endeavors played the catalyst in bringing about rapid change in all spheres of life. He raved about how at a budget that was barely 3% of NASA’s, India is the role model to the world in space applications – it is one of six countries with the capability to make satellites and launch them from its own soil; one of four that demonstrated capability for re-entry of spacecraft from space and the facilitator for a major discovery of water molecules and water ice on the lunar surface.

He recommended that the priority of space-based applications should be to contribute towards the national endeavours in food and water security, weather and climate, environment and ecosystem, education and health care, skill development, rural communication, infrastructure development, disaster management support, smart governance, sustainable development and related national imperatives. Furthermore, they should become part of the value chain of the user community.

Entering the arena of commercial quality and efficiency, Reliance Group’ Chairman affirmed that the ability to adopt low carbon operations as well as sustainable business practices will be one of the key determinants for successful businesses in coming years.

In conclusion, Mukesh Ambani encouraged the students to dream and ideate. He advised them to always keep the economic dimension of time in sight while making decisions and inculcate a spirit of leadership. He advised them to develop strength of character above all else and contribute to uplift the society they live in while they move up the ladder of corporate success.