News: Brothers Ambani in race to make up for lost time

(BS 16/06/2006) Mumbai - The skirmish that rocked India’s most valuable business group seems a distant memory now, and the Ambani brothers seem to have only one thing in common these days — both are vigorously trying to make up for lost time.

In the one year after mother Kokilaben's announcement (made on June 18 last year) of the formula to split up Reliance, Mukesh and Anil Ambani have announced some of corporate India's most ambitious plans.

Mukesh's Reliance, for example, has plans to invest Rs 100,000 crore in the next three years. It invested the same amount in the last 30 years.

For Mukesh, annual general meetings are great platforms for big-ticket announcements. Last year in August — it was his first public meeting after the split in June — he unveiled his plans in the oil sector. He will use this year's AGM on June 27 to make mega announcements on retail.

Consider the speed at which the group is working. In January this year, it announced its foray into retail with an initial investment of Rs 3,250 crore, and the launch of a wholly owned subsidiary, Reliance Petroleum, to set up a $6 billion refinery at the special economic zone at Jamnagar.

Three months down the line, Reliance Petroleum launched its IPO and Chevron picked up 5 per cent in the company with a right to scale it up to 29 per cent.

Sources close to him say the elder Ambani conceived the idea of foraying into retail even before the split was announced as he knew that he would have to give up telecom.

A confident Mukesh is now riding the increased spending capacity of consumers and the groundwork done by established retail players (Pantaloon and Shoppers Stop).

The plan is to do a Wal-Mart in India by developing a low-cost supply chain model which will involve massive economies of scale. The strategy is to set up a chain of supermarkets, hypermarkets, speciality chains and convenience stores in 800 cities across the country.

In short, the largest retail chain the country has ever seen. The idea is to do things differently. For example, Reliance would sign an MoU with the Harsh Neotia-controlled Bengal Ambuja towards the end of this month wherein they will hand-hold each other.

This kind of partnership is unheard of in the industry. For example, the broad contours of the agreement (it is not yet signed) suggest that Reliance will set up anchor shops at Neotia's malls in West Bengal. Neotia will also have screens at the properties of Reliance. Neotia will be Reliance's vehicle for growth in east and north east.

Then there is his plan for special economic zones. RIL is setting up SEZs as large integrated world-class townships spread over 100,000 acres in Maharashtra, Bengal, Punjab, Haryana and Andhra Pradesh.

At least four time of that money would come in from third party investors wanting to set up projects. For example, companies like Exxon-Mobile etc would set up projects at Reliance Petroleum's Jamnagar SEZ.

If Mukesh is going great guns, brother Anil isn't far behind. Industry watchers say he wants to be the number one private telecom player in the country in the next three to four years straddling both GSM as well as CDMA technology.

He also wants Reliance Capital to be a one stop financial services house and is targeting to become a large scale infrastructure player, which will not be limited only in power but straddle newer areas like bidding for metro rail projects (it has won the Mumbai metro), roadways (it is undertaking a project in Tamil Nadu), airports and even SEZs (it has a project in Punjab in 5,000 hectares of land).

And he is spending over Rs 700 crore — one of the largest makeover budget in the country — to create a new identity and logo.

The change is clearly reflected in the telecom business — the junior Ambani does not want to be only an integrated telecom player (like Mukesh did) but converge it with the world of entertainment. In the last one year, Reliance's subscriber base has virtually doubled to 27 million.

In the same year, Anil's strategy of convergence of telecom with entertainment was unravelled with his acquisition of a majority stake in Adlabs — its key entertainment vehicle.

Reliance Communications is also planning a bevy of services — from IPTV on the broadband, mobile TV, video on demand services. It has a fibre optic backbone which can be used to distribute movies to the multiplexes.

On the energy front, the company is looking at setting up power projects in neighbouring countries like Nepal and Bangladesh and even in West Asia; it is scouting for partners to bid for gas exploration overseas and even look at acquisition of coal mines in global locations, which will feed the power plants in India.

Anil Ambani has of course fixed stiff targets. Reliance Energy for instance is already building over 2,850 Mw of new capacity and the target is that by 2011 it would double this to over 15,300 Mw.

In the financial services space, the group was able to raise a staggering Rs 5,759 crore from the market through over 900,000 applications in Reliance Equity Fund -- the largest resource raising effort by a mutual fund ever.

And with over Rs 24,000 crore of assets under management, Reliance Capital has emerged amongst the top three financial services companies in the private sector