Stepping on the gas

Anil's net worth goes above that of Mukesh

Through deft restructuring in his businesses, Anil Ambani and entities controlled by him will see their net worth as calculated by market cap go above those of Mukesh Ambani and the entities he controls after the merger of Reliance Infocomm with Reliance Communication Ventures (RCoVL).

Anil had held 40.54 per cent stake in RCoVL, and with the promoters transferring their 64 per cent stake in Reliance Telecom, 55 per cent in Reliance Communication Infrastructure and 35 per cent in Reliance Infocomm to the reorganised RCoVL, Anil Ambani will gain control of 63 per cent in RCoVL.

This will result in the outstanding shares in RCoVL increasing from 122.31 crore to 204.5 crore shares. This will take the value of Anil's stake in RCoVL from Rs 16,205 crore (as on March 16 price) to Rs 42,103 crore, assuming that the share price remains at about the same levels after the restructuring.

The impact of Anil's increasing stake in RNRL will not be significant on his net worth as he has to invest an incremental Rs 1,052 crore to increase his stake to 55 per cent after the preferential issue, and the market cap of that company is just a tenth of RCoVL.

Based on the shareholding information provided by the older companies to the stock exchange in December 2005, and the public announcements before the listing of the shares, and the subsequent changes, Anil Ambani-controlled market cap across his companies will go up from the current Rs 34,280 crore to Rs 61,730 crore.The Mukesh controlled market cap stands at Rs 52,174 crore.

Cairn Energy: India shining

Cairn Energy's plans to list in India is a thumping endorsement for the domestic stock market. Cairn, an oil exploration company, wants to remain small, and focus on exploration and separate the exploration and production (E&P) business through an IPO of the Indian operation.

While separating some of the operations is just business as usual, getting a substantially large business listed in India is certainly out of the ordinary.

No doubt that most of Cairn's oil assets are in India, with some operations in Bangladesh and Nepal, and hence, a listing in India is logical. Nevertheless, it will be a first of its kind listing.

Cairn increased its estimates of oil in its Rajasthan block from 2.5 billion barrels to 3.5 billion barrels and forecast production to be at least 150,000 barrels a day, which could get started as late as 2008. ONGC had been in talks with Cairn to acquire these assets but the two companies didn't agree on price.

According to reports, Cairn was expecting $3.8 billion from ONGC, which seems quite large when compared to its market cap of $5.9 billion. But it would not have been difficult for Cairn to find other buyers like funds to pick up stake in the India operations.

This way too, it could have sold the assets and returned money to shareholders, and focused on exploration. With the talk of IPO, some analysts are even expecting that ONGC may open talks again.

P/Es in India are about 30 per cent higher than in the UK. That, too, could be a reason. But the fact that Cairn is looking at the Indian stock market indicates that the Indian market has come of age.

Voltas: Summer sales

Voltas is the latest consumer durable player to leverage the Indian consumer spending story as it targets expanding its market share in the domestic air conditioning market.

The company already offers air-conditioners priced below Rs 10,000 category and its latest plan involves expanding its range of products in the price sensitive Sec B and C segments.

Analysts say that the the lower-end segment of the air-conditioning market is growing rapidly, which makes the company's move logical just as households prepare for summer.

Voltas is also attempting to leverage the current upturn in this air-conditioning market by expanding its capacity in tax-free Uttaranchal. The company's current market share in the domestic air-conditioning market is pegged at 16 per cent and it is the second largest player in this product segment valued at Rs 3,000 crore.

During the December 2005 quarter, the company was able to shrink the segment loss of its unitary cooling products division to Rs 0.41 crore as compared to a segment loss of Rs 5.09 crore in Q3 FY05.

Analysts highlight that a key factor that has contributed to this improvement has been the recent closure of its loss-making Hyderabad facility for manufacturing refrigerators.

Meanwhile, the company's other divisions like the electro-mechanical projects and services, also enjoyed another quarter of strong demand for cooling solutions from user industries like multiplexes and BPOs in the last quarter. As a result, overall operating margin of the company expanded 387 basis points y-o-y to 5.67 per cent in the December 2005 quarter.

However, with a P/E of 32 times estimated FY 07 earnings, the stock may not have too much head room to appreciate further.