Mukesh Ambani’s optimism at the 38th annual general meeting of Reliance Industries (RIL) failed to rub off on the company’s shareholders.
The majority of these shareholders quizzed Ambani on a host of issues — dipping gross refining margins, plummeting gas reserves at the Krishna-Godavari (KG) basin, impending arbitration with the government, the company’s share buyback policy and investment by the company in East India Hotels (EIH), which operates the Oberoi Hotels & Resorts and Network 18.
“I am deeply perturbed with the falling gas output of RIL’s KG-D6 gas field. Why doesn’t RIL hire some expert to check the falling output? BP (British Petroleum) has been on board for over a year now, but nothing much has been achieved,” said S Mehta, an RIL shareholder who owns 200 shares.
“RIL’s investments in EIH and TV18 are not good. Its growth path has slowed, and the company has run into various problems with the government,” said P Mane, another RIL shareholder.(Click here for chart)
In January, RIL had tied up with Raghav Bahl-promoted business, news and entertainment media house Network 18. RIL-promoted Independent Media Trust funded the buyout of its own stake in regional news and entertainment channel network Eenadu Television (ETV) by Network 18.
Both Network18 and its subsidiary, TV18, raised equal amounts — Rs 2,700 crore each — through a rights issue, funds for which came from the trust.
In 2010, RIL acquired 14.8 per cent stake in Oberoi Group company EIH for Rs 1,021 crore. In March, RIL raised this stake to 18.53 per cent. EIH had brought in RIL as a white knight in a surprise move in 2010 to thwart possibilities of a takeover by rival ITC, which had been accumulating shares in EIH since 2000. Currently, ITC holds 14.98 per cent stake in the company.
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Another area of concern for shareholders was the buyback RIL had announced early this year. Shareholders said the money RIL was using to buy back its shares would have been utilised better, had this been invested in its businesses. So far, RIL, which began a buyback programme of Rs 10,440, has purchased shares worth Rs 1,929 crore through open market transactions — 22.5 per cent of the targeted amount.
“We have, till date, bought back 27 million shares at a cost of Rs 1,929 crore. This represents 22.5 per cent of the cap set by the board, in terms of the number of shares,” RIL Chairman and Managing Director Mukesh Ambani said, while addressing the company’s shareholders. “The buyback represents highly accretive use of cash by the company. It will supplement earnings growth from operations for higher EPS (earning per share) in the near future,” he added.
While a few shareholders expressed concern about RIL hitting the headlines for wrong reasons after the changes in the Ministry of Petroleum and Natural Gas, others felt the company should not opt for arbitration against the government.
One of the shareholders expressed concern on RIL’s retail business and its 4G plans. “RIL holds pan-India spectrum for broadband services for two years now. When will the company come up with a concrete plan for rolling this out? When would RIL’s retail business break even?” he asked.
To these, Ambani said, “You all don’t understand what Dhirubhai Ambani stands, despite being shareholders for a long time. It is very easy to sit here and criticise. But the very fact that we have found, after 30 years, oil and gas in the Krishna Godavari basin should not be undermined by anybody...I expect you, me, my board and the entire country to appreciate and support our young people.”
He added RIL was building the consumer value chain, which it believed was the business of the future. “As my shareholders, I want you to understand we are building a new consumer value chain. In most parts of the world, among the top value generators are energy companies and consumer companies. In India, we have a unique opportunity through which, in ten years, we can create this new consumer business, both in retail and in digital,” he said.
Ambani added none of RIL’s investments were “unrelated to the company’s focus”.