ANIL AMBANI - Leveraging His Own Wealth

ANIL AMBANI - Leveraging His Own Wealth
BAIJU KALESH

Last week, Anil Ambani said he would invest Rs 6,500 crore to shore up his ownership to 42 per cent in Reliance Energy (REL).

Promoters use their personal money to plough back into their businesses for three reasons. First, to show their confidence to investors in the company’s future prospects; second, to ward off a takeover threat as was done by Kumar Mangalam Birla in Hindalco Industries; and third, to strengthen the company’s net worth.

For Anil, the investment was to double REL’s net worth to Rs 20,000 crore and leverage it to execute REL’s Rs 18,000-crore order book of roads, highways and commercial properties. REL has already bid for projects worth Rs 1 lakh crore. The company also wants to transform into a full-fledged infrastructure player. The newly carved out Reliance Power would focus on new large projects in India. REL would scout for projects, both in India and abroad.

A higher net worth will help REL qualify to bid for upcoming opportunities in South-East Asia and West Asia. Dubai and Abu Dhabi have plans to invest close to a trillion dollars in infrastructure. So the idea is to strike when the iron is hot
(Businessworld Issue 11-17 Dec 2007)