New Delhi: Flush with billions of dollars of cash, Mukesh Ambani-led Reliance Industries may soon announce overseas acquisitions and a faster roll-out of its telecom services, a research report has said.
"Over the next few months, we anticipate positive news flow on several fronts including broadband rollout and potential acquisitions, as well as the gas business," Global financial services major HSBC said in a brokerage report on Reliance Industries (RIL).
There are expectations of a number of major announcements from RIL chief when he addresses the company's shareholders at its Annual General Meeting on June 3.
Speculations are rife that Ambani would announce major business initiatives and investment plans for RILs various existing businesses as also new ventures in telecom, power and financial services.
Earlier in April, the company said in an investor presentation that it would pursue both organic and inorganic growth opportunities to meet its growth aspirations.
Besides, it also disclosed an "investment programme of over $10 billion to cater to domestic market" in petrochemicals business.
Earlier at an investor conference in February, RIL had projected investment totalling $25-30 billion (Rs 1,10,000-1,35,000 crore) for the next five years in its various businesses, including energy and telecom sectors.
RIL has already identified 'new partnerships' that will be the core vehicle for its growth initiatives going ahead, after successfully entering into over 50 partnerships over the past five years, including a tie-up with global energy giant BP.
Commenting on RIL's sale of 30 per cent stake in its 23 oil and gas blocks to BP, HSBC said that RIL faces an "abundance of cash" situation post this transaction.
"RIL has already received $2 billion and another $5.2 billion is expected to come in over the next 12 months.
"We believe RIL will be more eager to deploy this surplus cash, rather than return it to shareholders. Hence it is possible there will be announcements regarding acquisitions and the potential faster roll out of its telecom venture," it added.
RIL's cash balance nearly doubled to a record high level of over Rs 42,000 crore in the last fiscal ended March 31, while its very low debt-equity ratio can allow the group to borrow further funds for various businesses.
Last year, RIL had raised $1.5 billion of debt in dollar-denominated bonds at very competitive rates and talks are already on for overseas borrowing of an equal amount.
In its report, HSBC said that it expects the RIL management to now "take an active role in the rollout of its broadband business having already invested (about) $3 billion a year back.
"Additionally, with limited opportunity in India for deployment of capital, we would also expect RIL to pursue overseas acquisitions with increased intensity, else there would be increasing pressure on the RIL board to return a part of the cash to shareholders".
HSBC also said the management's time would be less burdened with existing businesses, as the issue of falling gas production would be taken care of by the combined BP-RIL team.
Therefore, the management would be able to spend more time on "future growth vehicles like broadband and potential acquisitions".
"The downstream businesses are running smoothly, with strong leadership teams in place, and do not require day-to-day intervention from decision-makers," it added.
The group is said to be working on various business expansion strategies for different segments and a consolidated view of these initiatives could be announced by Mukesh Ambani at RIL's June 3 AGM in Mumbai.
In last year's AGM on June 18, 2010, Ambani had said that he was aiming to double the group's enterprise value in less than a decade, from an estimated $80 billion (Rs 3,70,000 crore) at that time.
RIL's revenue rose by 29 per cent during 2010-11 fiscal to Rs 258,651 crore, while its net profit increased by 25 per cent to Rs 20,286 crore during the period.
For the financial business, RIL has been approached by a number of global giants, while talks are also on for tie-ups with international players in the telecom arena.
Global investment major DE Shaw Group has already been roped in and names like American Express are doing the rounds for financial services business partnerships.
In the telecom business too, global names like Verizon, AT&T, France Telecom and Alcatel Lucent are being speculated as possible partners, although there is no official word as yet.
However, the group's proclamation, through Mukesh Ambani's letter to shareholders in the annual report for 2010-11, about its intention to bring on board new partners of international scale continues to give rise to speculations about the possible partners.
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