Up and running

After months of uncertainty, Reliance Industries' shareholders have a map of the future. Not only have the details of the unlocking of RIL's holdings in Reliance Energy, Reliance Infocomm and Reliance Capital been spelt out, Mukesh Ambani has also laid out his vision of the company's future.

In essence, his strategy is to spend around Rs 49,000 crore over the next five years on expanding capacities in practically every business the company is in. For example, refinery capacity will be doubled and petrochemical capacity will be increased by 20 to 25 per cent across the product range.

In the process, the company will increase the scale of its plants so that its Jamnagar refinery will become the largest single location refinery in the world, and the company will be the world's largest polyester and yarn producer.

While the scope of the plan is impressive, it is not very different from the known Reliance strategy. True, Mukesh Ambani has emphasised his global ambitions, but that global orientation has already occurred to an extent, given the fact that the company's exports are around a third of its revenues.

Nevertheless, Mukesh's clear message at the annual shareholders' meeting that he is on the lookout for petrochemical acquisitions abroad, underscores the reality that the company needs to look to overseas markets to spread its wings.

Traditionally, Reliance has been a builder rather than an acquirer, and although it has acquired Trevira GmbH and an onshore oil block in Yemen, a major acquisition abroad will chart new directions for the company. In spite of these changes, however, it can be argued that Reliance Industries is merely doing what it has to do""find a way to invest its massive cash surpluses.

As a matter of fact, analysts estimate that the company's internal accruals will be sufficient to fund its entire capex programme. Mukesh Ambani's strategy has clearly been to expand the company's existing businesses, although there have been sketchy reports about his interest in life sciences and retailing. In fact, RIL's main businesses are synergistic.

In contrast, the younger Ambani's strategy has to be very different. Unlike Mukesh's company, his businesses are not proven behemoths, nor do they have any synergy between them. All the more incentive for him, therefore, to build scale rapidly.

That is precisely what Anil Ambani has done at Reliance Capital, pouring funds into the company, taking over AMP's share in AMP Sanmar Life, and aiming to become a big player in financial services. Reliance Energy too has huge expansion plans, including the gas-based power plant in Dadri in Uttar Pradesh (the world's largest gas-based power plant in a single location) and a 12,000 MW coal-based plant in Orissa.

But while Anil Ambani's businesses may lack the scale of RIL, they do have money""Reliance Energy has a strong balance sheet, and a lot of capital has been invested in Reliance Capital. In Reliance Infocomm, however, cash will be required to roll out the network and the services that will realise the company's vision of convergence.

From one point of view, therefore, Mukesh Ambani starts from a position of strength, while Anil will have to do far more work to build his companies. On the other hand, it is also true that RIL's is a commodity business, while Anil's businesses hold bigger opportunities. There's little doubt, however, that both the brothers are in a hurry to prove that they are worthy of their father's legacy.