Ambani Vs Ambani: Mukesh Ambani enters direct competition with Anil Ambani’s insurance business

13-Jun-2011
Source : The Economic Times

By T V Mahalingam,

It’s Ambani versus Ambani, again. On Friday, Mukesh Ambani’s $58-billion Reliance Industries (RIL) announced that it inked an agreement with Bharti and French insurance major AXA to acquire Bharti Enterprises’ 74% stakes in two insurance joint ventures — Bharti Axa Life Insurance and Bharti Axa General Insurance. ET broke the story on April 29.
The move marks Bharti’s exit from insurance and Mukesh’s entry into another business in which his brother, Anil, is present. It is Reliance’s second foray into financial sector — one in which his brother, Anil, has established firms like Reliance Securities, Reliance Capital, Reliance Life Insurance Company and Reliance General Insurance Company.
In March, RIL had announced a JV with US-based DE Shaw Group for the financial services business, after the brothers had scrapped a non-compete agreement between them in May 2010. RIL is yet to announce concrete plans it has for the space.
"It is obvious that Mukesh is moving into a business that he could not move in earlier because of the non-compete agreement. And he is choosing new businesses which have a significant retail play to do so," says a Mumbai-based analyst with an Indian brokerage, who did not want to be identified.
RIL’s plans in most of these new businesses, with the exception of insurance, are still nascent. Take RIL’s telecom play for instance. RIL has spent nearly $2.8 billion on acquiring 4G licences and spectrum by Infotel Broadband Services but the company is yet to announce what it proposes to do with the broadband.
In a recent interview with ET, Mukesh Ambani said the company was still "brainstorming" about how it plans to utilise the 4G licences but hinted that it would be beyond just a telecom play. "We want to be the Walmart of digital distribution," Mukeshi said. "In the cellular revolution, we were 15 years behind the world. When it comes to the data revolution, we will be on time," he added. RIL has also put its plans to start power plants on the backburner.
Meanwhile, Anil’s cash- strapped Reliance Communications, with an accumulated debt of Rs 32,000 crore, is trying to sell off a controlling stake of its tower infrastructure arm, Reliance Infratel. It also recently announced an 86% fall in net profit for the January-March quarter, largely due to a hyper-competitive market.