Reliance Capital plans IPO for life insurance arm

"Patthar ko mom kar de ye naam...”
— A shareholder at the Reliance Capital AGM on Tuesday

Annual general meetings (AGMs) that feature the Ambani name are often also literary affairs. Shareholders went into poetic rapture at the Reliance Capital AGM on Tuesday — the one above a mere sample — as Anil Ambani, chairman, spoke of a possible initial public offering for the company's life insurance arm and announced plans for a foray into investment banking.

"We are considering various options to unlock this value — from a potential IPO to strategic or financial stake sale, or even a combination of both — subject to necessary approvals," Ambani said at the meeting. A final decision will be taken shortly, he added.

The Anil Dhirubhai Ambani group has decided to transfer its cement venture to Reliance Infrastructure Ltd from Reliance Natural Resources Ltd as it will have better synergies with the former, chairman Anil Ambani told shareholders on Tuesday.

"As a natural extension of the power and infrastructure interests of our group, we believe it gives us strategic advantage to enter the cement sector... We have decided that our cement business will be implemented by Reliance Infrastructure," he said at the annual general meeting of Reliance Infrastructure.

The company will spend Rs10,000 crore over the next five years to set up a capacity of 20 million tonne per annum. According to Ambani, cement demand is rising despite the economic slowdown and in 2008-09 (Apr-Mar), the industry grew 8%. The sector is expected to maintain the growth tempo for 10-15 years.

Reliance Infrastructure later informed the Bombay Stock Exchange that it has acquired 51% stake in Reliance Natural Resources Ltd’s cement arm Reliance Cementation Pvt Ltd. However, the company did not disclose the amount it paid for Reliance Cementation.

"Nearly 40% of the cost of manufacturing cement comes from the three key ingredients of coal, fly ash and power. Given that all three are at the core of our existing portfolio, there are obvious synergies that are waiting to be exploited,” Ambani said.
Last week, Reliance Cementation had signed a memorandum of understanding with the Maharashtra government to set up a 5-mln-tn integrated cement plant in Yavatmal district with a grinding unit at Butibori in Nagpur. It has plans to invest 22.50 bln rupees in the Maharashtra plant.

Reliance Infrastructure is also keen on pursuing the upcoming projects for international airports at Navi Mumbai, Pune and Goa, he said.

The company has emerged as the highest bidder for the privatisation of five brownfield regional airport projects in Maharashtra, which includes designing, development, upgrade, financing, operating, maintenance and management.

The company at present has cash or cash equivalents of close to Rs 10,000 crore on its balance sheet with a debt-equity ratio of 2:1.

Reliance Infrastructure, in consortium with Hyundai Engineering of Korea, has emerged as the preferred bidder for the Western Freeway project — an extension of the Bandra-Worli Sea Link in Mumbai.

Once the project is awarded, the company will take over the 6 km Bandra-Worli Sea Link and construct a further 5.5-km long extension over sea between Worli and Haji Ali—estimated to be completed in four years. The cost is of the project is pegged at Rs5,100 crore.

Reliance Infrastructure has quoted viability gap funding of Rs 1,392 crore for the project. Ambani also said he is committed to increase the promoter holding in all ADAG companies to over 50% in the “medium term”.