The Mukesh Ambani interview

A day after RIL announced a 1:1 bonus, ET NOW caught up with RIL chairman Mukesh Ambani, who spoke on issues ranging from RIL’s next priorities

to the rules of a reset world economy. Excerpts

M R Ambani, congratulations on this massive bonus share issue. It’s a huge gift for your shareholders, but what is the larger message you are sending out to them. Would you like to tell them through ET NOW?

As far as Reliance is concerned, we have always had what I call value creating cycles. Since we went public in 1978, our compounded returns to shareholders are in excess of 25% year-on-year.

The last growth cycle was really the biggest asset and value creation cycle in our history. It was also the most challenging. The results are we have an SEZ refinery, which demonstrates to the world that India, in spite of having no oil, can import oil, use its talent and competitiveness in complex technologies to create assets and then export products. This strengthens India in export terms and it gives us confidence that we can be on par with high-technology companies in the energy sector and even exceed them.

The other piece was deepwater gas production and we have again set new benchmarks. Where the world takes about 10 years to go from concept to (production), we have done it in a much shorter time. The project has created huge value for the economy. Natural gas is a major feedstock to the fertiliser industry and it reduces subsidies and so creates value for the government. Obviously, it also creates value for our farmers in terms of making sure that we are able to give them urea based on indigenous feedstock and it (helps) the power situation, which overall strengthens energy security.

Having created this value, we were committed to making sure that we reward the shareholders. This is a fulfilment of promises that we had made at our AGMs. Also, I would like to thank literally a few thousand Reliance managers and engineers who worked over the past four years 24x7, 365 days and it’s because of their hard work that we are able to deliver this value to the Indian economy.

From the timing point of view, if you look at what’s happening around India and the world, everyone is trying to cut costs. So, it was a very bold decision on your part to do a contrarian thing and come out with a 1:1 bonus.

When the economic meltdown hit the world in 2008, we were in the midst of one of the biggest capital expenditure programme, not only in India but in this part of the world. A lot of people (scaled back) their plans. Many refineries or upstream projects are on hold.

We wanted to stay on track and we had the financial resources and the discipline to execute, so we stayed on track. Once we have conviction, we think through everything and we then stay on track. Given the difficult global situation, we have now to embark on thinking through what our future plans will be and how do we create new value.

You are still cautious about the global recovery?

What happened last year was not part of a normal cycle. It was, what I called very early on, a reset. And what I meant by reset is the rules of managing the economy, the rules of business, the rules of creating value (that) will evolve between now and the next few years. To my mind, they will be very different than what we have been used to for the past 20 years. The (main change) would be that money will not create value.

At the end of the day, it is products and services that are needed by a society when delivered on a competitive basis that will create value. We

need to find a solution to all the debt that we have created. We have to repair balance sheets. Governments have put in money, but remember that the government stimulus is like a crutch. We still need to find a road map so that we can have a healthy recovery and we can get to a new way that the world will work and within that there will be value creating opportunity.

So in a reset world, what is Reliance’s strategy?

Well at Reliance what we always thought, and this really is from my father, is business always has to have a purpose. So we will focus on our existing sectors. We will think about what societal gaps, particularly (those which) exist in India that need either our expertise in management or financial resources. These gaps need to be filled or corrected and sometimes it (is) about creating a new business model. The third leg we are adding to is organic as well as inorganic growth.

This inorganic opportunity obviously has to be overseas?

For us, the criteria is not whether it is in India or outside. The criteria is what does Reliance bring to the table in terms of people, its processes, the synergies that you can create and above all the strength of India and how we can integrate and create some unique value.

How do you see the energy market evolve in the next 1-1.5 years?

Well, I think that if I can take a much longer-term view then the world will be forced to (take) the low carbon route to energy. To my mind, all of that is going to be dominated by technology and you know this will be one of the big opportunities of the 21st century. The next 10-15 years will be similar (to) the communication revolution in the last 25-30 years that has changed our life. Now the good news is that there will be participation from everybody and India is not excluded.

Within that, in the short-run, like the global economy, we will navigate through unpredictability, uncertainty and volatility. So it’s very difficult to predict and I can admit to you frankly that whenever I have predicted I have been wrong.

Do I read between the lines that you are saying that crude prices aren’t going back to the $140 levels?

Frankly I don’t know and if anybody thinks he knows I got to meet the guy.

You mentioned recently that 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?

Well more than my own children I’m amazed when I see the commitment levels in young Indians (which) is the real strength of India. I think as a country we have to empower them, to unleash their energies on problems.

It took Reliance nearly 30 years to create a Rs 1,50,000-1,60,000-crore company. I can bet you that in 2025, there will be at least 10 to 15 companies that we don’t know today, run by 35-year-old guys that you and I don’t know, in a variety of sectors (which will be) Rs 1,50,000-crore companies. We are going to see many more Dhirubhais.

What sort of a milestone would you look for before maybe the next 1:1

bonus?

We will continue to really strengthen our position in energy and all our existing business lines but we always believe we need to take one or two big issues that India has and lead the way. So what we are thinking about right now is how can we understand the societal gaps (in terms of) what needs to be done to propel the Indian economy forward and how we as Reliance can contribute to that by putting all our managerial execution and financial resources to make a difference to millions of people. That’s the goal that we have set. We will articulate this over the few next months to come.

Health and education are really the two big problems that India faces. So does Reliance have some plans to be a game changer in these areas?

(On) these issues, it is much better that we speak by action than words. But clearly there are quite a few areas like education, health and mass housing which meet the aspirations of people and we need to think through what’s the right business model.

How do you really deliver services in the health and the education area to millions of people that they will value and will make a sensible business model? We think about it all the time but we have to solve the problem. We have initiatives in all these three areas and we learn from our small initiatives. When we have the confidence then we would scale those up.

If you could just wish India and our viewers Happy Diwali...

Absolutely. I take the opportunity to wish all the viewers of ET NOW a very happy Diwali and a prosperous New Year. To all my fellow Indians a very Happy Diwali, a prosperous New Year and many achievements in the coming year.