Reliance Industries at Rs 1055….”The Best Years Lie Ahead” says Mukesh Ambani…how does it stack up against Global Giants?

Switched on my mobile this morning after a few days of tackling a tough Viral…thank you guys for all your “get well” wishes…they worked

Listened to the live broadcast on stock channels of Mukesh Ambani at the 36th AGM of RIL this morning in Mumbai rolled out the roadmap ahead for his Group…this are a few interesting bytes that really caught my ear

• Now with the rescinding of the Non Compete Agreement with brother,Anil Ambani’s (ADA) Group, Mukesh Ambani’s RIL Group will enter the Power Industry in a very big way…a blueprint is being prepared….what is amusing however is that despite discovering and drilling Gas from the KG Basin,RIL will not execute any gas based project till 2022…so it’s going to be coal based,hydel,nuclear and alternative energies projects….ironically it is supplying this Gas to Other Fertiliser and Power Plants as directed by the Government…even to ADA Group Power Plants when they are ready to accept and if the Government directs then
• Organised Retail has earned Revenues of Rs 4500 crs in 2009/10….in just Five Years it will jump ten fold to Rs 45000 crs !…..keeping in mind that RIL is the first Indian Company to cross Rs 200000 crs turnover this year,this would be a great contributor 

Anything BIG to earn and HIGH growth rates forecast,then rely on RIL to enter that sector….Petrochemicals,Petroleum,Retail,Infrastructure….nowTelecom,Pharma,Healthcare,Power,Education.

What next ?

How about Information Technology …RIL can take a look at the three World Tech Giants,Google,Apple and Microsoft……have a look at this Comparative Table I’ve prepared…RIL against Peers and these three Tech Giants…I’ve used todays ref rate US $ =Rs 46.14 for translating RIL’s Share Price of Rs 1055 and Market Cap of Rs 345135 crs…However RIL Financials are as sourced from RIL’s website (imputed rate used by them is US $ =Rs 44.64)…for the other Global Giants,the figures are sourced from the NYSE/Nasdaq 

KEY COMPARATIVE STATISTICS : RIL v/s Global Peers and Global Tech Giants

Clearly the Tech Giants rule the Exchanges in terms of Valuation and even Market Caps…High Multiples,High Profits and Profit Margins,Low or No Debt,Rising Revenues with new product launches have worked wonders for the three Tech Giants

RIL always thinks BIG…..Organic Growth in Technology Sector will take ages…But with a Market Cap of relatively lower US $ 75 b and the fact that 1/3rd of Capital Employed is through Debt even Inorganic Growth looks difficult for RIL to take over a major World Giant among it’s peers and even the Tech sector if it wants to enter it….what does look interesting is the Infotel playout it has just started with a near US $ 4 b layout…I’ve got their presentation on this and shall be examining it closely sometime soon

So are RIL’s Best Years Ahead as Mukesh Ambani assured shareholders today ?….With strong proven large scale project implementation capabilities RIL surely is excited about the opportunities opening up in India and even overseas…RIL is already a Giant in India in it’s Operations…With It’s Expansion Plans in Petrochemicals,it’s new big scale forays in diversified fields,it hopes to be reckoned as a Global Giant

It’s Best Years may certainly be ahead,but the above table shows it’s got a hell of a lot of catching up to do with Global Giants

Oh ! it’s near BP’s mkt cap only because BP share Price has crashed following the Gulf of Mexico Oil Rig Explosion that is throwing out ,latest upward estimates of 40000 to 60000 barrels of oil into the Sea and is yet to be capped…. seen to be the biggest economic disaster USA is facing….Interestingly President Obama has managed to extract a promise of an initial US $ 20 billion in an escrow account from BP for settling claims and damages for this continuing disaster….if you look at the table,that’s just one year’s sacrifice of PAT for BP….I’m sure there will be more extracted

So should RIL be in your Portfolio ?……and with what weightage?…Simple answer is “Yes”…and the weightage should be atleast 10% of the Equities you hold…..Like Larsen & Toubro and State Bank of India,RIL remains a strong proxy for the India Story…Who Knows ! remember the late 1980s and the BOB Fiscal fiasco when RIL had made a serious and aggressive and hostile bid for Larsen & Toubro only to be thwarted…with Larsen’s market cap under US $ 24 b today,RIL may just relaunch this ambition !…it has never liked losing !….OH ! I just love it when my mind meanders !

Cheers !