(Corrects spelling in paragraph 2)
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)
By Jeff Glekin
MUMBAI, Jan 18 (Reuters Breakingviews) - Tales of the Ambani
brothers' mixed fortunes tell the same story -- declining
opportunities for investment in India. Mukesh may be cash-rich
while Anil is in stark need of funding. Although some think that
has the makings of a reconciliation between the two, that's
unlikely. Mukesh would rather buy his own shares than those of
Mukesh Ambani's Reliance Industries is considering
a share buyback, in which Mukesh himself is thought unlikely to
participate. The firm has net cash of around $10 billion.
Mukesh has been linked to numerous acquisitions including an
investment in his brother's Reliance Communications.
But the buyback announcement suggests a dearth of sound
investment opportunities for India's richest man. That's not
good news for the Indian economy, reinforcing the impression
that political paralysis is stifling investment. Nor is it good
news for Anil.
Reliance Communications, whose share price nearly halved
last year, is saddled with around $6 billion in net debt. Anil
has been trying to sell his telecoms tower unit for almost two
years. A deal with GTL Infrastructure collapsed in 2010. In
November he entered into negotiations with a private equity
consortium of Blackstone and Carlyle. That deal was expected to
complete in December but so far nothing has been forthcoming,
though it may eventually fetch up to $3 billion.
In the absence of hard cash from the sale of his
infrastructure, Anil has this week raised funding from several
Chinese banks to refinance $1.18 billion of outstanding
convertible bonds. Sources said on Wednesday he also intends to
raise up to $1.5 billion through an IPO in Singapore of his
undersea cable unit.
Mukesh may feel that his own business has better prospects
than his brother's. Perhaps he's hopeful that the current
problems in ramping up production at India's vast KG-D6 gas
basin will ease once the expertise of BP, with which he
formed a joint venture last year, kicks in. He may be happy to
let the public markets, private equity and Chinese lenders bail
out his brother while increasing his percentage stake in
Reliance Industries by buying back other shareholders' stock.
But neither story tells paints a hopeful outlook. Indeed,
the tale of the Ambanis is a microcosm for corporate India: some
businesses are struggling to unwind excessive leverage while
others can't find productive uses for their surplus cash.
-- Reliance Industries is considering a share buyback, the
company said on Jan. 18, sending its shares up as much as 4.4
percent. Shares in the energy focused conglomerate controlled by
Mukesh Ambani, India's richest man, fell 35 percent in 2011.
-- The firm's cash reserves stood at $14 billion in the
quarter ended Sept. 2011 when it had outstanding debt of $15.1
billion. Cash may rise to $25 billon by March 2012, according to
UBS, largely due to the sale of a 30 percent stake in its 21 oil
and gas blocks to BP in August 2011 for over $7 billion.
-- Meanwhile, Anil Ambani's Reliance Communications is
looking to raise up to $1.5 billion through an initial public
offering in Singapore of its undersea cable unit, Reuters
reported on Jan 18.
-- Reliance Communications has also raised funding from
several Chinese banks to refinance $1.18 billion of outstanding
foreign currency convertible bonds, the firm said on Jan. 17.
-- Reuters: India's Reliance to consider buyback, shares
-- Reuters: Reliance Comm may raise up to $1.5 bln in unit
(Editing by Hugo Dixon and David Evans)