Tuesday, January 22, 2013

Is this what was the nature of the beast?

Reliance Infrastructure's grand plans to expand massively seem to have forgotten a simple factor... Funding! Is this what was the nature of the beast? B&E's Ratan Lal Bhagat deeply questions the method in the madness

Starbucks took inspiration from Starbuck, the Chief Mate of the Pequod ship in Herman Melville''s popular novel Moby Dick. But Anil Ambani seems to have taken his inspiration from the chief character – Moby Dick, the famous white whale in the novel, which single-handedly destroyed the ambitions of an entire ship and crew that dared to attack it with their so-called sophisticated weapons! Inspiration not for the name, but for the group''s approach to business. ADAG has always sought to enter bluer oceans; and when they do, other ships better get their radars on! The Rs.116.90 billion net worth infrastructural giant R-Infra (earlier Reliance Energy) with an M-Cap of Rs.230 billion has been reorganised into five different verticals. It has projects lined up in transport route developments i.e. road, metro et al, power distribution & transmission, Engineering, Procurement and Construction (EPC) and energy trading. It has unleashed a plan of investing Rs.300 billion in the next 5-6 years on various projects. Anil Ambani summed it up perfectly in a recent AGM (September 2008), "(After government initiatives) prospects of private sector participation in infrastructure development are brighter than ever before. We are single-mindedly pursuing the emerging opportunities & expanding our footprint across the entire infrastructure landscape."

Well, nobody ever accused either of the Ambani brothers of thinking small! But then, aren''t the waters murkier here, since infrastructure does not enjoy the quick turnaround time that ADAG has leveraged from sectors like media, telecom and financial services? Moreover, "the company has a large number of projects under development, exposing it to execution risk. Funding these projects will be difficult given the current credit scenario," cautions N. Wadhwa, Director, SKI Capital Limited. Are there going to be some real clouds on the horizon for R-Infra''s aggressive plans?


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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