Ambani Armed With $12.6 Billion to Buy Assets as Energy Valuations Slump
By Rakteem Katakey - Oct 17, 2011
Billionaire Mukesh Ambani’s Reliance Industries Ltd. (RIL) is poised to use its record cash for overseas acquisitions to take advantage of the cheapest valuations of oil and natural gas companies in three years as profit growth slows.
“Reliance has a strong balance sheet and sustained earning base to pursue growth opportunities,” Chairman Ambani, 54, said Oct. 15 after the refiner and explorer reported that asset sales to BP Plc (BP/) helped boost cash to 614.9 billion rupees ($12.6 billion). Quarterly profit rose 16 percent from a year earlier.
Reliance, PetroChina Co. and Cnooc Ltd. are among Asian companies likely to spend $150 billion over the next five years on assets to secure energy supplies for the region’s growing economies, according to Sanford C. Bernstein & Co. Ambani has bought shale gas assets in the U.S. and is targeting acreages in Canada after a drop in gas output in India led to a 21 percent decline in his company’s shares in Mumbai trading this year.
“A large energy acquisition may be just what they need to kick-start things,” said Kamlesh Kotak, vice president of research at Asian Markets Securities Pvt. in Mumbai. “That will be the best possible use of their cash, which has become pretty huge now.”
Reliance fell as much as 4 percent, its biggest decline in almost a month, after its net income of 57.03 billion rupees for the three months ended Sept. 30 fell short of the 57.1 billion rupee median estimate of 22 analysts surveyed by Bloomberg. Profit was little changed from the preceding quarter.
The stock was down 3.5 percent at 837 rupees at 12:48 p.m. in Mumbai. The benchmark Sensitive Index fell 0.2 percent.
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