The economic downturn has forced the Anil Dhirubhai Ambani Group (ADAG) to rethink its new ventures in shipping and steel sectors even as its plans for cement business are yet to take off from the blueprint stage, said sources in the know.
Earlier, the company insiders had indicated that the Anil Ambani-led group was working on ambitious plans to invest Rs 65,000 crore in these three new areas over the next five years. This included Rs 20,000 crore investments in cement and Rs 40,000 crore towards a steel plant in Jharkhand. It was also planning a foray into shipping services, primarily to bring coal for its power projects from its coal mines in Indonesia, with an investment of Rs 5,000-7,000 crore.
“For the time being, the group will put on hold its diversification plans since the company is evaluating the market conditions. If the financial scenario continues like this, it will cause tremendous pressure on commodity prices and fall in demand. The fund-raising for the investments will be another hurdle as the banks are restricting the corporate lending,” said sources.
However, a top executive of the group said that the planned foray into cement business has made “considerable progress” and everything is “on track”, but he declined to give details. The group had earlier appointed Anil Singhvi, former managing director of Ambuja Cements, to head the cement division.
In the case of shipping business, ADAG has not yet made up its mind whether to own vessels or lease it for coal transportation. “As of now, there is no change in plans related to shipping. We need the coal to be transported to India for our ultra mega power project at Krishnapatnam in Andhra Pradesh and for other projects. Currently, the freight rates are falling along with the drop in ship building costs. So, we are yet to finalise which option to take for taking the advantage of the downturn,” said a company executive.
As steel projects need huge investments, ADAG has not yet firmed up its plans. There will not be any “back turn” or any “forward movement” for the steel business is concerned, the executive said.
Anil Ambani in his group company Reliance Natural Resources' (RNRL) annual general meeting in September 2008 had told the shareholders “We are proposing to set up nearly 20 million tonnes of cement capacity at select locations where we have synergies with our energy business as well as the presence of a growing market within easy distance. Our first plant may come up in Madhya Pradesh in the next four-six years.”
He had said that the group planned to foray into the shipping business on a captive basis "to cater to our group requirements". However, the group had not made any official statement on the steel project in Jharkhand. But the industry secretary of Jharkhand told media in September 2008 that ADAG had approached them to set up a 12 million tonne per annum steel project.