Despite huge profits, margins under pressure
By Alok Agarwal | 21 Jul 2000
Given below are the responses of Mr. Anil Ambani, managing director of Reliance Industries to some of the queries at the press conference held to announce the results of first quarter ended 30 June, 2000:
On BSES
According to Mr Ambani, following its open offer earlier, the company has acquired a further 11 per cent of the equity of power utilities company, BSES Limited. This 11 per cent was acquired from the disinvestment from retail investors and one institutional investor, the name of which Mr. Ambani declined to divulge. As a result of this acquisition, the company now has invested Rs. 800 crore for a 27 per cent stake in BSES Ltd. He described the BSES acquisition as a "strategic step in the pursuit of growth in the power and telecommunication sectors".
Mr Ambani said Reliance was now considered a promoter of BSES, in terms of Regulation 2H of the , Following this development, said Mr Ambani, Reliance had decided to nominate directors on the BSES Board. He also stated that the company could now acquire an additional 5 per cent holding every year from the open or the secondary market in the form of creeping acquisition.
Since the company has crossed the threshold limit of 20 per cent, it will now consolidate the accounts of BSES Limited with that of Reliance, based on the equity accounting method. This could add another Rs. 100 crore to Reliance's balance sheet.
Mr Ambani, however, made no comment on whether Reliance will end up raising its stake in BSES which, he said, would depend largely on what value BSES will offer to Reliance in future. He, however, did confirm that Reliance's interest in BSES was much more than just that of an investor, having already invested Rs 800 crore in the company.
On Reliance Telecom
Mr Ambani informed the press that Reliance Telecom Ltd., which commenced its cellular operations in Himachal Pradesh, Madhya Pradesh, Orissa, Bihar, West Bengal, Assam, Nagaland, Manipur, Mizoram, Sikkim, Megahlaya, Tripura and Arunachal Pradesh, has managed to expand its customer base from 69,000 to 90,000 in 40 cities. For the current fiscal, the company is targeting to increase its customer base to 150,000 over 90 cities.
On Reliance Infocom
According to Mr Ambani, the Reliance group is in the process of creating a "world class Internet infrastructure" that will offer value-added voice, data and imaging services over a broadband network.
Mr Ambani said as a part of this overall plan, which will wire up 115 cities, the company has already begun laying cables spread over a distance of 3,200 kms in the state of Gujarat . He said the project envisaged an investment of about Rs 15,000 crore spread over a period of two years. He said the company was already in talks with several world class players for alliances.
In reply to a question from domain-B on the anticipated returns from its investments in this sector, Mr Ambani said, "Though it is too early to put forward accurate figures, Reliance is looking at a return of around 20 per cent on its investments in Reliance Infocom. Reliance Industries will be the key investor in all our infocom investments."
On acquisitions
He said that after October 1999, the company has not received any further communication from the government on its bid for the acquisition of the Indian Petrochemicals Corporation Ltd. On the likelihood of Reliance bidding for Hindustan Organic Chemicals, he said the company is interested in acquiring anything that has value.
