After acquiring a 14.12 per cent stake in East India Hotels (EIH) for R1,021 crore and acquisitions worth another $3.6 billion (R16,920 crore) in shale gas projects in the US, what will be the next big move by Mukesh Ambani-managed Reliance Industries Ltd (RIL)? Will it be another acquisition in an unrelated area like hotels or an announcement to set up some greenfield project in a related business like power?
"After investing billions in setting up the world's largest refinery complex at Jamnagar in Gujarat, we invested another $10 billion (R47,000 crore) in developing our gas block (D6) in the Krishna Godavari basin," said a senior company executive, not wanting to be quoted. "Now we want to shop for good assets that can add value to the company and its shareholders."
While the official refused to give any further details on the company's next move, his comments clearly reinforces the shift in company's strategy and what Reliance's executive director, P.M.S. Prasad had earlier told Hindustan Times, when the company was in the thick of controversy over the costs incurred by it in producing natural gas from its KG-D6 block.
"One of the biggest lessons learnt by us is that never ever expose the company to a $10 billion (R47,000 crore) risk as we have done for this one project (the KG-D6 gas project)," Prasad, who is also on the RIL board, had told Hindustan Times in a September 2009 interview.
"I have told Mr (Mukesh) Ambani that there is no way that I will ever come back to him and ask for an amount as big as $10 billion for a single project. In our anxiety to do things in least possible time and for creating world-class benchmarks, we are only exposing the company to risks," Prasad had said.
Clearly, a year down the line, the shift is visible and RIL has added assets to its portfolio through the acquisition route.
So, what's next? Sitting on cash reserves of $5 billion (R23,500 crore), the next big acquisition by RIL is expected to be that of a coal-based power project. A source said RIL has shortlisted some power projects for acquisition and is eyeing a coal-based power project in Karnataka. It is also exploring the acquisition of coal mines and minerals in South Africa, Australia and Indonesia.
The company has also announced plans to enter transmission and distribution of power.