After surprising shareholders with a bonus issue of one share for every share held, Reliance Industries Ltd’s chairman Mukesh Ambani spoke in an exclusive interview with CNBC-TV18's managing editor Udayan Mukherjee, outlining his growth plans and basic shifts in the world economy that has changed rules. Excerpts.
The bonus came as a surprise to your investors. What was it meant to be? A signal?
It was a Reliance tradition, a commitment that whenever we finish a value creation cycle, we make sure that everybody is rewarded and in this value creation cycle, this was the biggest in our history where we had nearly Rs 100,000 crore of assets coming on line. And it has improved India’s exports; the natural gas has really helped the fertiliser and the power economy. And so after all the stakeholders it was the shareholders’ turn. This was a commitment that we have made and this is something we are committed to.
You attended our last India Business Leader Awards (IBLA) Conference and at that conference you used a phrase which was received with some consternation by a lot of people, you said globally asset prices have to go through a ‘reset’. What did you mean by that and do you think prices have been reset, asset prices as you indicated?
What I really meant is not only asset prices; I think that the whole global economy and when we talked about it and when we saw things between the second half of last year, fundamentally what I mean by reset is that the rules of the game in the future will no longer be the same as the rules of the game in the past. And they will apply to virtually all the aspects in terms of economy and business as we know it.
You were not referring purely to commodity prices globally?
No. I really was saying that what we have been used to for the last 20-30 years and what we are going to see in the next 20-30 years that’s a reset.
You can apply it to many different things but a reset is a reset. It’s a new way of adjusting to a new reality.
Globally, I still think that we need to see a clear recovery path in terms of how do we repair balance sheets and how do we repair balance sheets of countries, balance sheets of consumers in the developed world. Within that, India is still a very small part of that world and the good news is that our balance sheets are strong. The country is strong, our consumers are not leveraged, our corporates are good and our economy has a lot of potential.
Do you think global demand supply will improve and these globally focused companies may continue to do better going into next year?
I think that as the world readjusts, understands the resets and charts out a path to repair and renew, there will be opportunities. The challenge really is that one has to recognise that on the back of debt there is overcapacity, and that overcapacity has to rationalise. For Indian companies, in virtually all sectors, the challenge really is to be the most productive, to be the most competitive, to be the most efficient.
Globally, also commodity cycles have overcapacities?
My view is that with the debt pinch that the world has gone through, you would be surprised as to what kind of capacity readjustments there will be virtually in all sectors.
You spoke about an asset cycle. Are you ready for the next value creation cycle at Reliance as well?
Yes, we are. We have laid that down pretty well. We laid down from AGM to AGM (annual general meeting) over a three-to-five year period. So, you will have to wait for the next AGM to get specifics of that. But the direction is not changing at all.
You’ve just completed one and investors want to know that for FY11 to FY15, the next five years, are you clear in your mind on what the vehicles of growth will be for you?
Absolutely. If you read our last AGM speech, you’ll get that. We will spell out the specifics on November 17.