Anil Ambani group to foray into power equipment


New Delhi : As it readies for India’s largest public offering next week, the Reliance Anil Dhirubhai Ambani Group has decided to foray into power equipment manufacture in ties with a global major, chairman Anil Ambani said here Sunday.

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“We are currently in dialogue with two-three global majors,” Ambani said while announcing the $2.75-billion public offering of group company Reliance Power, touted as the country’s biggest since the $2.4 billion offer by real estate major DLF Ltd last year.

He said while a separate company in the group will undertake the manufacture of power equipment, the collaboration with the global major could be in the form of a joint venture or technology tie-up.

Only a handful of companies, led by General Electric of the US and Siemens of Germany, have the technology to manufacture power equipment for large, super-critical projects globally.

“In the next few months you will hear some news on this. We are progressing fast on our decision to manufacture power equipment,” Anil Ambani told a press conference on the upcoming public issue, the first for his two-and-a-half-year group.

In the mega public offer of 228 million shares, 30 percent has been earmarked for retail investors, who also get a discount of Rs.20 per share.

The offer opens for four days from Jan 15 in a band of Rs.405-450 per share. The net issue would constitute 10.1 percent of the post-issue paid up capital of the company, Ambani said.

He hoped the issue would be fully subscribed given the group’s track record, where market capitalisation had grown from Rs.150 billion ($3.75 billion) in June 2005 to over Rs.3,250 billion ($81 billion) now.

This, he said, would stand the group in good stead even though he acknowledged that there have been moves to sabotage the public issue, especially with some members of parliament writing letters against it.

“Even the spelling mistakes in the letters were identical,” he said, as he took a dig “those who launched the campaign” against the offer. “Growth will have its hurdles. We will see that we cross them.”

Ambani said even though there was a demand for pre-placement of the public offer, he decided against it in favour of retail investors. “We cannot offer more than 30 percent to retail investors. Otherwise, we could have offered more.”

Reliance Power, which is an associate of Reliance Energy, was awarded the 4,000-MW Krishnapatnam power project in November, after it bid the lowest tariff of Rs.2.33 per unit among all qualified bidders.

Another major project awarded to the company is the 4,000-MW Sasan power project in Madhya Pradesh, which was awarded in August. All put together, the group has 13 medium and large power projects under development, Ambani added.

He said one of the biggest constraint the country faced for large and small power projects alike was the availability of good quality equipment, not just in terms of technology but also in pricing, competitiveness and deliveries.

He said around 28,000 MW of power generation was in the pipeline within the group, to be executed within the next 4-5 years.

“It is the largest portfolio of power generation projects within a single group and geographical area anywhere in the world,” he said.

Under the 11th plan period (2007-12), the government has envisaged adding 80,000 MW of power and Reliance alone is hoping to achieve a more than a third of the planned capacity.

Ambani said his group would also keep a close watch for inorganic growth, by acquiring power utilities, but added that there was limited scope since it would require a change in government policy towards divestment.