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Wednesday, July 09, 2008

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No one like Mukesh Ambani, when it comes to creating wealth

WhatNo one like Mukesh Ambani, when it comes to creating wealth goes into the making of good quality life? Get yourself a dream American job, find a sprawling British mansion to live in, eat authentic Chinese cuisine, a traditional Indian wife, and... and what? Shares of Reliance Industries limited (RIL), so that you remain afloat in times of financial distress?!

For decades, RIL has been a good partner to a significant group of investors, amidst the not so significant stock-savvy Indians. The adage – survival of the fittest, applies not just to individuals but also to companies, communities and countries, believes Mukesh Ambani, Chairman, RIL. Whether in terms of creating shareholder’s wealth or the conviction with which it does business, there is admiration all around for RIL and Mukesh Ambani. And not without reason. The company which started off with textiles, today straddles polyester, fibre intermediates, plastics, petrochemicals, petroleum refining, oil and gas exploration & production. If father Dhirubhai laid strong foundations of the Ambani empire, son Mukesh has carried forward his legacy and business acumen perfectly, since his death in 2002. Just the increase in share prices of RIL in last five years has been a smashing 1,000%. Little surprise that awards and accolades for the elder scion of the Ambani clan abound, the latest being the United States-India Business Council leadership award for “Global Vision” 2007, in Washington.

Clearly the strategies that have been thought up by Mukesh Ambani to take Dhirubhai’s legacy forward have paid off in multiples. Here come a few of the strategies that have helped Mukesh and RIL scale dizzying heights. Firstly, “RIL is primarily a B2B company. 99% of its companies are B2B, and secondly, 55% of our revenues come from export. Because of this, we don’t need much of marketing and sales. Even if we do, it is sparse. Particularly in 2007, we have done no marketing,” confirms a Reliance spokesperson.

The year 2007 has been particularly eventful for RIL, even as its oil and gas exploration & production arm has gone on to script amazing success stories. The Empowered Group on Ministers approved the pricing formula for sale of gas from KG D6. The company also announced its first oil discovery in Krishna deep-water basin on the east coast of India. However, the company prefers to be modest about its accomplishments. “Success can’t be defined in particular terms. One has to have the conviction that oil and gas can be found there – it depends purely on luck. We might be trying for 3-7 years to explore an oil basin, but due to luck, one may strike in a lesser time. It’s the lucky person who strikes the goal,” says the spokesperson.

What El Dorado was to 16th-17th century explorers, the Krishna-Godavari (KG) Basin is to 20th-21st century investors, including Mukesh Ambani. RIL holds 90% participating interest in the KG Basin & Canada based partner Niko Resources holds the rest 10%. The first gas find of RIL, which is also the largest gas find in the world, was in 2002, where production is scheduled to begin in 2008.

“The KG Basin gas find catapults the company into one of the largest gas players in India, having a capacity of 40 mmscmd, which is further expected to double in a year’s time,” opines Sarabjit Kaur Nangra, VP, Research, Angel Broking. “At present, KG Basin accounts for almost 10-15% of the overall value of RIL. The key reason behind the success of RIL has been the huge scale up that the company has been able to do for the individual segments,” feels Kaur.

Now Mukesh Ambani has his eyes set on achieving global leadership, evident in RIL’s recent expansion plans and latest acquisitions. Petroleum, chemical and oil & gas segment have been on a high growth trajectory, on back of robust GDP growth, posing a growth of 9.4% and 17.9%, respectively, last year.

Reliance Petroleum Limited (RPL) the greenfield petro-refinery in a SEZ in Jamnagar, Gujarat (being set up by RIL) will ink a new chapter in the history of RIL and its stakeholders. RPL will be the world’s largest grassroots refinery. Even before commencing operations, RPL has set global benchmarks in project implementation and wealth maximisation (RPL stock jumped from Rs.60 in January this year to Rs.290 in November). Not surprising, when you remember that scalability of businesses is RIL’s key vision, it automatically translates into maximised shareholders’ wealth. All one has to do, is to remember the key ingredients of a happy life, of which RIL (or at least their stock) may have now become an integral part! Just ask the millions of investors who’ve ridden the RIL boom!

Edit bureau: Sunanda Roy

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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1 comment:

Do you need help planning your finances? said...

I also have invested in RIL and I have no complaints for Mr.Ambani.