Twenty five billion dollars, sitting free and idle and earning little return, can lead to a lot of speculation... even more so if the company holding it is Reliance Industries (RIL). That's perhaps why it has been forced to issue official denials to quell two rumours of big buyouts. The first was the buzz that it's making a hostile bid to acquire Valero Energy, the world's largest oil refiner.
The emphatic denial, issued on November 1, resulted in Valero shares shedding 7% on the New York Stock Exchange. Again, more recently, RIL had to deny reports about plans to buy out Kingfisher, Vijay Mallya's beleaguered airline.
Even as marketmen make their guesses on how Mukesh Ambani could put Reliance Industries' cash pile to good use, ET reached out to five well-known management gurus who have advised dozens of Fortune 500 companies between them (see last page). All their answers resonate with Ambani's caution - a contrast to many investor demands that it deploy this cash quickly.
The market is impatient to know how Reliance Industries plans to use its billions. It has about Rs 61,490 crore on its books as on September 31, 2011 and Rs 8,300 crore is being added every quarter. Another $3.2 billion is still due from BP (part of BP's $7.2-billion deal to buy 30% stake in RIL's 21 oil and gas blocks, including the gas-rich D-6 block). "RIL's treasury stock ($7 billion) could further boost this to $25 billion or Rs 1,30,000 crore," conclude UBS analysts Ashish Jignani and Ruchi Patwari.
But Reliance is no longer the swashbuckling company it was in the nineties, when it aggressively raised a slew of 10-year-to-50-year bullet loans to fund growth. It has now parked its billions in bank fixed deposits, mutual funds and certificates of deposit, a cautious approach preferred by retired and conservative investors.
Ironically, it is the weight of money (besides falling gas production in KG basin), that is now making RIL look sluggish in the stock markets - the scrip has underperformed the sensex by 5% year to date. Ambani and his A team have to address this head-on in order to grow and become India's first firm with $100 billion in market capitalisation. The company is likely to end FY12 with revenues of $63 billion.
Slow growth in new areas
Ambitious plans to set up Chinese-style special economic zones in Haryana and Maharashtra were thwarted by political activism.
The retail business has hit roadblocks too, partly due to business reasons and partly due to India's trader lobby and a few politicians. India's most populous states Uttar Pradesh and West Bengal are still not entrenched on the Reliance retail map. Ambani's initial plan of investing $5 billion in the retail business by 2012 is unlikely to be fulfilled. Reliance's retail businesses posted combined revenues of Rs 6,050 crore and losses of Rs 500 crore in FY11.
The emphatic denial, issued on November 1, resulted in Valero shares shedding 7% on the New York Stock Exchange. Again, more recently, RIL had to deny reports about plans to buy out Kingfisher, Vijay Mallya's beleaguered airline.
Even as marketmen make their guesses on how Mukesh Ambani could put Reliance Industries' cash pile to good use, ET reached out to five well-known management gurus who have advised dozens of Fortune 500 companies between them (see last page). All their answers resonate with Ambani's caution - a contrast to many investor demands that it deploy this cash quickly.
The market is impatient to know how Reliance Industries plans to use its billions. It has about Rs 61,490 crore on its books as on September 31, 2011 and Rs 8,300 crore is being added every quarter. Another $3.2 billion is still due from BP (part of BP's $7.2-billion deal to buy 30% stake in RIL's 21 oil and gas blocks, including the gas-rich D-6 block). "RIL's treasury stock ($7 billion) could further boost this to $25 billion or Rs 1,30,000 crore," conclude UBS analysts Ashish Jignani and Ruchi Patwari.
But Reliance is no longer the swashbuckling company it was in the nineties, when it aggressively raised a slew of 10-year-to-50-year bullet loans to fund growth. It has now parked its billions in bank fixed deposits, mutual funds and certificates of deposit, a cautious approach preferred by retired and conservative investors.
Ironically, it is the weight of money (besides falling gas production in KG basin), that is now making RIL look sluggish in the stock markets - the scrip has underperformed the sensex by 5% year to date. Ambani and his A team have to address this head-on in order to grow and become India's first firm with $100 billion in market capitalisation. The company is likely to end FY12 with revenues of $63 billion.
Slow growth in new areas
Ambitious plans to set up Chinese-style special economic zones in Haryana and Maharashtra were thwarted by political activism.
The retail business has hit roadblocks too, partly due to business reasons and partly due to India's trader lobby and a few politicians. India's most populous states Uttar Pradesh and West Bengal are still not entrenched on the Reliance retail map. Ambani's initial plan of investing $5 billion in the retail business by 2012 is unlikely to be fulfilled. Reliance's retail businesses posted combined revenues of Rs 6,050 crore and losses of Rs 500 crore in FY11.
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Its plan to set up mega thermal power stations hasn't progressed beyond paper and ink. This year's chairman's address to shareholders was silent on it. Other new businesses aren't of much consequence yet in the RIL scale of things.
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