RIL AGM - 38 YEARS OF CHANGING TIMES

By Ruma Dubey

The market dismissed the 38th AGM of RIL within a few seconds of its conclusion.  That is the world we live in today – everything is instant and pops like a fire cracker – bright one moment, agog with expectations and fizzled out within minutes.

When Mr.Mukesh Ambani began his speech, he began reminiscing about the company having completed over 35 years on the bourses when it got listed in 1977. RIL till today remains the market mover and shaker.

And while down the memory lane, a few fortunate who had attended the RIL’s AGM when chaired by the legendary Mr.Dhirubhai Ambani, rue at the small, non-event it has become today.  Ramnikbhai, 65 years old, after today's AGM clicked his tongue and wistfully said that those were the days. He recounted, saying, “ It was a record, Dhirubhai had booked a stadium in 1985 for the AGM, then Bombay, at Cooperage Football Ground. It was the first AGM ever held in the open. A canvas awning was put over the ground and there were around 12,000 shareholders, including me. I knew history was being made. It was an event which got covered even in London’s Financial Times.”

There was no stopping Ramnikbhai. He continued, “I vividly remember Dhirubhai walking onto the podium to speak. There was a roar of applause as though people were greeting some big leader. He was wearing a suit but soon, as his speech progressed and he got animated, he removed his suit and continued speaking in his shirt. His speech used to be liberally interspersed with Gujarati, or sometimes mainly in Gujarati and he had a way of connecting with people like me and you. We felt he was part of us and believed that nothing, no dream is impossible. That was the AGM where the name and symbol was changed from Reliance Textiles to Reliance Industries. It was like a carnival, where food packets were distributed! I am forever indebted to RIL as its shares helped fund my daughter’s marriage.”

Yes, like Ramnikbhai, there are thousands of investors who have built their life thanks to RIL shares. And as Mr.Mukesh Ambani said today, those who had invested Rs.1000 in 1977 have seen their wealth growth to over Rs.7 lakh in these 35 years.

Well, that was then and this is now. Neither will those days come back nor will the AGM have the magic of Dhirubhai. RIL has built on the legacy left behind and we now look at a new dimension of the company emerging. Unfortunately, today the stock is not earning much money for the shareholder and seems to be stuck in a crux.

And if today the AGM was a non-event it was essentially because of this change in psyche. People like Ramnikbhai do not see the magic like before and the new generation, on number crunching, does not see much in the immediate future. And it was a non-event because apart from forward looking statements, there was really nothing much.

There was major disappointment as he did not really say much, not on facts which needed clarifications. A quick look at what he said and what he did not…

What he said….

·         Have spent Rs.1929 crore to buy back 27.9 million shares, which is 22.5% of buy back target

·         Reinvesting  cash flow into new business

·         Elastomer and acetyle for future growth,  

·         Value added products to lead growth in petchem

·         Using five new crude varieties to augment margins

·         Petchem projects to start reflecting in P&L from 1-3 years

·         60 mmscmd of gas target at KG-D6 over next 3-4 years

·         1300 Reliance stores across 18 states in India, footfalls currently at 30 lakh per week, expects to go to one  crore per week in next 3-4 years

·         Expect sales of Rs.40,000 to 50,000 crore via retail operation over next 3-4 years

·         Shale gas to become major part of company’s portfolio

·         Finalising plans for nationwide launch of digital services

·         Target set to double operating profit in 4-5 years

·         Plan to invest Rs.1 lakh crore in India over next 4-5 years

Four facts emerged from these – firstly, the five crude variants will improve the GRM of the company; secondly, the company till end of March had bought back 72 lakh shares and this buy back of 2.8 crore shares shows that the ramp up happened in the last two months alone. Thirdly, its three areas of focus will now be – retail, shale gas and 4G. Infact retail and shale gas could have its challenges but 4G could be the game changer. It has already invested $3 billion of the $5 billion on this and is expected to roll out by Dec, which may most likely get nudged ahead to March 2013. And last but not the least, the company plans to invest Rs.1 lakh crore over the next few years in India; that’s a huge amount of money and good for the country though where it plans to invest this money is not known. It will surely be in core sectors and that should be exciting.

What he did not say….

·         D6 output, he indirectly admitted was a problem even after getting in BP but made no promises and toned down all targets

·         No clarification on the hefty fine of over $1 billion for failing to meet gas output targets.

·         No news about its foray into financial services where it had announced a JV with DE Shaw Group.

·         No talk about the falling GRMs.

·         Sitting on a huge pile of cash, no talk about which sectors it will invest in.