New Delhi: Reliance Industries shares zoomed nearly 10% on Tuesday, adding Rs 71,638 crore to the company’s market valuation after the announcement of a host of investor-friendly proposals at its annual general meeting. This follows company’s chairman Mukesh Ambani’s announcement of plans to sell stakes in the firm’s oil and chemicals business to Saudi oil giant Aramco and in fuel retail network to BP PLC for Rs 1.15 lakh crore. Seizing the opportunity, Ambani said its telecom unit Jio will begin offering fibre-based broadband services from next month. The twin deals along with deleveraging of telecom arm Jio’s infrastructure assets will help Reliance become “a zero-net debt company within the next 18 months, that is by 31 March 2021”, Ambani said at the company’s annual general meeting (AGM). Ambani announced further a rollout of the fibre-based fixed-line broadband services from 5 September, offering internet speed of at least 100 Mbps and free voice calls for life for as low as Rs 700 per month.
Reliance, the oil-cum-telecom giant, saw its scrip jump 9.72% to close at Rs 1,275 on the BSE. During the day, it climbed 12.09% to Rs 1,302.50. Reliance was the top gainer among the 30-frontline stocks on the key BSE index. On the NSE, its shares gained 9.74% to close at Rs 1,275.30 apiece. Billionaire Mukesh Ambani-led firm posted its biggest one-day gain of 9.8% in a decade in terms of stock prices (the previous best was on 14 January 2009), the company said in a statement. Riding on the massive rally, the company’s market valuation advanced by Rs 71,637.78 crore to Rs 8,08,233.78 crore on the BSE. On the volume front, 20.92 lakh shares traded on the BSE and over 4.79 crore units on the NSE during the day.
The media has hailed the Saudi investment as a “game-changer for India’s energy security”. But what about national security?
Given that the whole economy is dependent on oil, an adverse geopolitical situation can lead to arm-twisting or blackmail by the foreign investor. Further, as seen in modern warfare, the communication network of a country is attacked first before invading it, as seen in the strategy of the US-led NATO forces during the two Gulf Wars. “Why is Saudi Arabia investing in these security-wise sensitive sectors of the economy?” questioned nationalist thinker and Supreme Court lawyer Amitabh Sinha. “People are hailing this mindlessly,” he said, adding it was expected of a businessman to be happy about having received such a large sum, but a thorough study of the motive of investment in a strategic area was warranted.
On market capitalisation, the company’s statement said this is the highest absolute market cap gain in a single trading day. “Reliance can further move towards Rs 1,300 soon. Going by the track record of the management and potential of the retail and digital market of India, Reliance’s announcements will prompt a fresh rush of buying the stock that can take it to new highs in short-term and may pass Rs 2,000 levels in next 12 months,” Romesh Tiwari, head of research, CapitalAim on the AGM of Reliance Industries Ltd, said.
Saudi Aramco will buy a 20% stake in the oil and chemicals business of Reliance including the 1.36 million barrels a day Jamnagar refining complex in Gujarat, for an enterprise value of $ 75 billion. BP will buy a 49% stake in the firm’s 1,400 petrol pumps and aviation fuel selling facilities at 31 airports for another Rs 7,000 crore. To that, Sinha said, “Why are they sidelining Pakistan and preferring India? An Islamic state wouldn’t do something that furthers no interest of Islam.”
“Saudi Arabia, a cash-rich country, had no particular reason to look for business opportunities in India,” said Sinha, adding that if it had to, it could have explored areas such as building roads, infrastructure, cement or even stakes in some power companies.
“And what place is it choosing for the investment? Jamnagar, a powder keg,” Sinha said, sounding concerned. Jamnagar is the largest industrialised zone in the western-most part of the country that also houses base stations of all three wings of defence: the Indian Army, Indian Navy and Indian Air Force. Geographically, Jamnagar supports all branches of defence, as it has access to the sea for the Indian Navy and a large airbase due to the city’s strategic location close to Pakistan.