Brothers in no hurry to face off?
The announcement that the Ambani brother are cancelling their non-competition pact may have brought cheer to investors, but it would appear that neither Mukesh nor Anil is in a tearing hurry to tread on each other’s turf.business Updated: May 24, 2010 22:28 IST
The announcement that the Ambani brother are cancelling their non-competition pact may have brought cheer to investors, but it would appear that neither Mukesh nor Anil is in a tearing hurry to tread on each other’s turf.
Sources close to the Ambani family are saying there is “no dying hurry” for such a move.
Mukesh-led Reliance Industries Ltd (RIL) is sitting on cash reserves of close to $5 billion (Rs 23,250 crore), but sources said “any diversification will have to be a well thought after strategy and not an emotional one.”
“RIL can look at new areas than getting into those under Anil’s turf,” the source said.
The new pact offers Mukesh the freedom to enter telecom, financial services, coal based power generation and infrastructure. Industry sources say the most likely foray is into big infrastructure projects, as RIL has in the past executed projects such as the construction of the two Jamangar refineries and development of the deepwater gas field in the KG basin. A telecom foray is unlikely at this stage, and financial services are not RIL’s forte. Coal-based power generation is a possibility, but not at present.
Similarly, Anil may not want to enter the capital-intensive refinery and petrochemical production, where margins are already shrinking.
“I think by doing so (scrapping the non-compete pact) they have taken a practical approach and it simplifies the whole process and there is less chance of dispute when one gets into a business of the other,” said Arvind Mahajan, head of energy and natural resources, KPMG.
Both the government and the markets have welcomed this pact. Planning Commission Deputy Chairman Montek Singh Ahluwalia said, “Although this has got nothing to do with the government, it will help the corporate sector.”