If you were wondering from where Anil Ambani was going to fish out that extra billion or two of dollars needed to buy out Hutchison Essar, you may do well to look at the performance of his Reliance Communications (RComm) scrip. Its robust recovery, after the market’s double jolts on December 11 and December 12, has already made Ambani richer by more than $ 2 billion, or nearly Rs 9,250 crore.
The stock’s recent run has left the Sensex way behind and has also significantly outperformed rival Bharti Airtel in the recent weeks. The RComm scrip has bounced back 16.8 per cent between December 12 and December 29, while the 30-share Sensex rose 6.1 per cent and Bharti Airtel 9 per cent.
A Reliance Communications spokesman refused to comment stating that the policy is not to comment on share price movements.
According to National Stock Exchange data, Anil Ambani controls 66.75 per cent of the company, which accounts for more than 136 crore shares of the company. The Rs 68-rise in the share since December 12 increases the value of the promoters’ stake by Rs 9,248 crore, or more than $ 2 billion, a sum that can play a critical role in the battle that Reliance is facing with British Vodafone to control Hutch Essar.
Reliance Communications’ market capitalisation will be one of the crucial factors that will be considered by financiers when they extend cash to Anil Ambani and his ADAG (Anil Dhirubhai Ambani Group) for the Hutch Essar bid.
The RComm closed 2006 at Rs 471 and is now 3.2 per cent higher than where it was on December 6, before the market faced a correction. The plunged laid everyone low, but RComm’s jump may have been aided by the news of its strong interest in buying out Hutch Essar, whose GSM mobile network fits strongly with Reliance’s desire to offer both GSM and CDMA based mobile services.
The Sensex is still to reach back the 13,972-point level reached on December 7 and is 1.3 per cent below it. Bharti Airtel, despite its 9 per cent recovery since December 12, is currently at 2.8 per cent below the Rs 646 it recorded on December 6.
The first hint of Reliance Communication eyeing a Hutch stake appeared around December 8, which was a Friday. After dropping to Rs 403 on December 12, as the news of Anil Ambani being in the fray got confirmed, the scrip raced up to Rs 466 over the next three days.
The fact that Ambani’s personal fortune has grown by $ 2 billion since the markets got a jolt in early December is expected to help in the fund raising. The prospect has got even tougher, with reports suggesting that Vodafone is pricing Hutch Essar at $ 20 billion.
VK Sharma, research head at Anagram Stockbroking said "The telecom sector will see 30 per cent year-on-year growth in the near future. If Reliance does take over Hutch, that will further change the valuations of the entire sector. The current price increase of the scrip is reflecting that, as well as the synergies that the two companies can enjoy."