Corporate: Relianc-e?

COMMENTARY
Relianc-e?

BSES' ICE initiative is the icing on the cake for the Ambanis.

By Roshni Jayakar .

Stitch by careful stitch, the tapestry the country's first business family is creating for its new endeavours is becoming clearer. There's no mistaking these moves: Reliance's efforts are aimed at re-establishing itself in each branch of the Net value-chain. From content to broadband, from entertainment to last-mile access, Reliance has made innocuous beginnings in several nodes of the ice food-chain and could well emerge the biggest shark in India's new economy. But you won't catch the Ambanis talking about this.

Thus, when Reliance ended close to a decade of ''will-it-or-won't it'' speculation-it has held a stake in BSEs since 1988-by making an open offer for a 20 per cent stake in the company, Reliance Industries Ltd's (RIL) Managing Director Anil Ambani had words only for the power sector: ''The open offer for BSEs represents a strategic step in our pursuit of attractive growth opportunities in the power sector. It reflects our commitment to the development of the power sector.'' Accepted, Reliance is certain to leverage BSEs' expertise in power to further its own blueprint for the sector.

Reliance, it is evident, will try to capture value across the entire energy-chain by pursuing power projects with relevant feed-stock linkages. In the next 10 years, Reliance hopes to have a power generation capacity of 10,000 mw. Today, it generates 800 mw (for its own consumption), and has plans to generate an additional 6,000 mw over the five years. Add to that quantum the 2,000 mw generated by BSEs, and RIL will generate around 8,000 mw by 2005. Apart from dovetailing neatly into its strategy of being an integrated energy company, this will also help Reliance balance the cyclic vagaries of its other main business-petrochemicals.

Is this a viable strategy? Taiwan's industry major FPC Group seems to think so: it is following a similar approach at its Mai Laio facility where it is setting up a refinery, a petrochemical complex, and a 3.2-gw capacity power plant.

With a last-mile access of close to two million homes in Mumbai-to which it supplies electricity-BSEs is certainly a catch for any company that wishes to pipe Net-and telecom connectivity to the end-user. The company's proposal to construct a 1,400-km fibre-optic network along its transmission lines, and route these into residences, should meet with RIL's approval. Reliance, after all, is working on a similar backbone along with Sam Pitroda's WorldTel in Tamil Nadu, and has plans for a fibre-optic back-end across the country with an eye to offering long-distance telephony and broadband access.

If there is a feeling of deja vu over this approach, it's because Reliance followed a similar vertical integration strategy in petrochemicals: from textiles to fibres and yarn, to PTA, to petrochemicals, to refining, and, finally, to crude oil. This elephant hasn't just learned to dance; it's trying to surf.

Issue Contents Write to us Subscriptions Syndication