‘Societal gaps needs to be filled’

The day after RIL announced a 1:1 bonus, ET NOW caught up with RIL chairman Mukesh Ambani in his legendary Maker IV office. In a free-wheeling interview with ET Now senior editor R Sridharan, Ambani spoke on a wide range of issues, ranging from RIL’s next priorities, to the rules of a reset world economy

Q: This massive bonus share issue is a huge gift for your shareholders – but what is the larger message you are sending out to them?
MDA: We have always had growth on what I call value creating cycles. In the last 31 years, since we went public, if we look at our compounded returns to shareholders they are in excess of 25% year-on-year.
The last growth cycle was really the biggest asset creation and value creation cycle in our history. To my mind it was also the most challenging. The result – we have an SEZ refinery, which demonstrates to the world that India in spite of having no oil of its own can import oil, use its talent and competitiveness to really create assets and then export products and be competitive anywhere in the world. So having created this value, we were committed to rewarding shareholders. This is nothing but fulfilment of a promise that we had made at our AGMs and I am happy that we could do it in time.
Q: There is a lot of talk about Bernanke saying that the worst is over but I sense a little caution as far as you are concerned. Why is that?
MDA: I think that what happened last year was not part of a normal cycle. It was what I call a very early-on reset. The rules of managing the economy, the rules of business, the rules of creating value will evolve between now and the next few years. It will be very different from what we have been used to for the last 20 years. The principle would be that money will not create value. I am a big believer that at the end of the day it is products and services that are needed by a society, delivered on a competitive basis, that really creates value. So we will have to go back to that and in going back we need to find a solution to all the debt that we have created.
Q: In a slightly uncertain reset world, what would be Reliance’s strategy ?
MDA: We will focus on our existing sectors. We will think about what societal gaps exist in India which need either our expertise in management or financial resources. These gaps need to be filled or corrected and sometimes it’s just about creating a new business model. So we will do both, we will take our existing sectors, new areas, and the third leg we are adding to is both organic as well as inorganic growth.
Q: Given your size, will inorganic growth be from overseas?
MDA: The criteria is not whether it is in India or outside India. The criteria are what value we can add. What does Reliance bring to the table in terms of its people, its processes, the synergies, and above all the strength of India? What can we do by taking the strength of India, in terms of its talent and knowledge, and how can we integrate and create some unique value? It’s not about going and buying every business. It is really trying to figure out how you can you create a uniquely new value out of an old asset.
Q: How do you see the energy market evolving in the next couple of years? Will demand and prices be going up in six to 12 months ?
MDA: If I can take a much longer term view, the world will be forced to think through what I call the low carbon route to energy. One of the big opportunities of the 21^st century will be how to create new energy. It is all going to be driven by technology, innovation and its going to be very exciting. Over the next 10-15 years it will be like the communications revolution we had in the last 25-30 years, that has dramatically changed our life. That’s what going to happen in the energy area. The good news is that there will be participation from everybody and India is not excluded. That’s the big picture. In the short run, like the global economy we will navigate through unpredictability, uncertainty and volatility. So its very difficult to predict and I can admit frankly that whenever I have predicted I have been wrong!
Q: You said recently India is not a land of a million problems but a land of million opportunities. What kind of opportunity would you like your children to pursue when they get into business?
MDA: The commitment levels, the energy levels that I see in young Indians are the real strength of India. I think as a country we have to empower them, to unleash their energies on problems and they can create value that even I would have never imagined. It took Reliance nearly 30 years to create a Rs 15-160,000 crore company. I can bet you that in 2025 there will be at least 10 to 15 companies that we don’t know today and 10 to 15, thirtyfive-year old guys that you and I don’t know in a variety of sectors that will be Rs 150,000-crore companies.
That’s the kind of opportunity that exists and I think that we have the resource, the entrepreneurship, the commitment and the diligence in our young people to create companies from scratch and to do it all by themselves. India’s time has come and it is now and all of us have to support it.

FUTURE BRIGHT: MUKESH AMBANI