Reliance Industries has long been the stalwart of the Indian Stock Markets. Some noted authors have often said that no one used the stock markets for raising capital better than Mr. Dhirubhai Ambani. However, Reliance has not fared really well at the stock markets in the recent past. Mukesh Ambani led Reliance Industries even missed the analyst expectations this time and the stock has been trading in red for quite a while.
The core oil and gas business of Reliance Industries though as robust as ever is showing signs of slowing down and with the non-compete period over between the brothers, Mr. Mukesh Ambani seems to have set his eyes on the financial services sector.
Mukesh Ambani led Reliance Industries has picked up stake in AXA SA- Europe’s second largest insurer. Basically, Reliance has bought out the stake of Bharti in the Bharti-AXA join venture for general and life insurance business in India. The new structure of the joint venture is,
RIL and its subsidiary Reliance Industrial Infrastructure (RIIL) would effectively own 57 per cent and 17 per cent, respectively, in both the insurance companies and would become AXA’s joint venture partners in India
It is also noteworthy that Reliance had a few months earlier struck an agreement with $20 Bn hedge fund – D.B. Shaw to start a stock-broking and private-equity business in India. By picking up the stake in AXA, Reliance will also add the lucrative general and life insurance capabilities in its financial services portfolio.
From Bharti’s perspective, selling the stake makes sense as there is very little synergy with their core businesses. Moreover, after buying out Zain, Bharti must be feeling strived for capital and with the proceeds from this sale, they will be able to infuse some capital in their core operations.
What will be interesting however is to see how Mukesh Ambani led financial services arm fares in the market.
With Anil Ambani already going strong in the Financial Services segment, comparisons will definitely be made. The elder brother seems to have a flair for doing things king size and given the seriousness and investments in the financial services business, this will be one interesting company to watch.
So, what do you think of this takeover ?