It was a great year for the richest man in Asia, Mukesh Ambani.
The Indian giant added nearly $17 billion to its fortune as of December 23, the largest amount in Asia, bringing its net worth to around $ 61 billion, according to the Bloomberg Billionaires Index. In comparison, the net assets of Alibaba Group founder Jack Ma rose $11.3 billion dollars, while Jeff Bezos lost $13.2 billion dollars.
Ambani's wealth this year was driven by a 40% increase in shares of Reliance Industries Ltd, a group that is shifting towards consumer offerings more than central oil refiners and petrochemical. The stock rebound is more than double the earnings of India’s benchmark S&P BSE Sensex during this period.
Investors are pooling money on Reliance, as they bet that new businesses such as telecommunications and retail can open value soon. With the goal of building a local e-commerce giant to challenge companies like Amazon.com Inc in India, Ambani has spent about $ 50 billion, mostly debt, on a wireless operator that has become number 1 in India within three years after its debut.
"Mukesh Ambani has changed the story of Reliance Industries" as a leader not only in oil and gas, but also in communications and retailers, and perhaps in e-commerce soon as well, said Chakri Lokapriya, investment director at TCG Asset Management, which oversees $ 3 Billion in assets in Mumbai.
"He identified, invested and quickly executed to create this new record," said Lokapriya. "We believe this could double the stakeholders' value in the next four years."
In August, Ambani said, modern companies are likely to contribute 50% of Reliance’s profits in a few years, from about 32% now. A Reliance representative did not reply to an email requesting comments on Ambani's fortune.
No net debt
Although the success of the mobile operator was a cause for joy, business leaders' plans to cut Reliance's debt have caused Reliance's actions to escalate.
Ambani, 62, promised to reduce the group's net debt to zero in early 2021. The plans include selling a stake in oil trade to chemical products from Reliance to Saudi Arabian Oil Company, with the inclusion of telecommunications and retail units within five years, selling tower assets and strategic partners to a digital platform linked to Reliance Jio Infocomm Ltd, the phone company.
Reliance shares have nearly tripled in value since the end of 2016 when Jio entered the Indian market with free calls and cheap data and forced some heavily indebted debt holders out or merging with their competitors. With more than 35 crore users, unlisted Jio posted a net income of Rs. 996 crore ($ 140 million) in the September quarter, while losses accumulated among other private operators.
However, investors do not trust the group's growing debt that has spent about $ 76 billion in the past five years. Reliance Industries had a net debt of Rs. 1.54 lakh crore in cash at the end of March 31, Ambani told shareholders in August.
Efforts to assist debt relief depend on:
Aramco Deal: Proposed sale of 20% of oil trade to Reliance Chemicals in a deal that would value the company at $ 75 billion (including debt). The agreement, which is expected to be completed in March, is subject to due diligence, final agreements, and regulatory approvals.
Portfolio: In late October, Reliance unveiled a radical plan to create a $ 24 billion digital services portfolio company, with the goal of making Jio virtually debt-free by March. Ambani said: "Given the scope and size of our digital ecosystem, we have received significant attention from potential strategic partners."
Brookfield: In July, Reliance announced the sale of a stake in an investment fund that will operate its mobile tower business to Canada-based Brookfield Asset Management for Rs. 25,220 million.
The proposed deal with Aramco faced an obstacle threatening Ambani's debt reduction plans. The Delhi High Court sought details of Reliance's assets after the government requested that the proposed sale be halted in an unrelated arbitration suit.
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