Ambanis May Drive India

Ambanis May Support $1.5 Trillion Roads, Ports Push

May 25 (Bloomberg) -- The decision by billionaires Mukesh and Anil Ambani to scrap a non-competition accord may spur spending on ports, roads and energy, supporting India's goal to invest $1.5 trillion on infrastructure, investors say.

The world's richest brothers split India's second-biggest business empire five years ago after their father died in 2002 without leaving a will and have squabbled ever since as their business interests collided.

Mukesh Ambani's Reliance Industries Ltd. and companies controlled by Anil added $4 billion in market value yesterday as investors welcomed the end to the non-competition agreement brokered by their mother in 2006. The accord sparked disputes that held up road projects in Mumbai, a power station near New Delhi and a merger with Africa's biggest mobile-phone company.

"Reliance Industries should get into building ports and power plants and roads because they are good at executing large projects," said Vikas Pershad, Chicago-based chief executive officer of Veda Investments LLC, which owns shares in the energy explorer and oil refiner. "Building infrastructure has a lot of synergies with their business. It will be good not just for the company but for the country."

India, ranked below war-ravaged Ivory Coast and Sri Lanka for the quality of infrastructure, on March 23 lowered its target for investment in roads and ports after failing to complete planned projects. Prime Minister Manmohan Singh the same day asked companies and investors to fund half the planned $1 trillion budgeted for the five years starting April 2012.

Biggest Complex

Mukesh, 53, completed the world's biggest refinery complex in December 2008 and four months later started pumping gas from India's largest natural gas field.

Under a 2005 agreement that split the Reliance group, Mukesh kept the petrochemicals, oil and gas units and Anil, 50, secured the power, financial services, telecommunications, and entertainment units. The brothers said on May 23 they were scrapping the accord drawn up the following year that barred them from expanding in each other's businesses.

"I wouldn't be surprised if Reliance Industries gets into the telecoms or financial services businesses," said Seth Freeman, chief executive officer at San Francisco-based EM Capital Management LLC, which owns shares in companies run by both brothers. "Mukesh Ambani has more than sufficient resources to get into any business he chooses."

Market Value

Manoj Warrier, a spokesman for Reliance Industries, declined to comment on the Mumbai-based company's investment plans. The Anil Dhirubhai Ambani group didn't respond to an e- mail seeking comments.

Yesterday's stock rally extended gains in the Reliance group companies that have more than tripled since the feuding brothers broke up the family empire. The brothers' six publically traded companies had a market value of $96 billion yesterday, compared with the unified Reliance group's $29 billion on Jan. 17, 2006, the day before the spilt took effect.

The rapprochement came after India's Supreme Court on May 7 ordered the two groups to resolve a disagreement over supplying gas from India's largest field that Mukesh controls. The brothers will now negotiate an accord to ensure Anil's Reliance Power Ltd. gets the fuel it needs to build gas-fired projects.

Negotiations will "eliminate any room for further disputes," the two groups said in statements on May 23. The companies will have "greater ability to participate in high growth sectors of the Indian economy, such as oil and gas, petrochemicals, telecommunications, power, and financial services," according to the statements.

Shares Surge

Reliance Industries shares gained 2.7 percent to 1,022.65 rupees in Mumbai compared with a 0.2 percent increase in the benchmark Sensitive Index. Reliance Infrastructure Ltd., the Anil Ambani-controlled builder of a mass rapid transit system in Mumbai, added 6 percent to 1,048.40 and Reliance Communications Ltd. rose 11 percent to 147.90 rupees.

Reliance Power climbed 7.9 percent, the most since July 15. Reliance Natural Resources advanced 23 percent, the biggest gain since June 15, and Reliance Capital Ltd. rose 4.8 percent.

In the years since the two brothers split the empire founded by their father, the late Dhirubhai Ambani, their battle over the price of natural gas from Reliance Industries assets halted plans for a major north Indian power plant, while a merger between Anil's Reliance Communications and South Africa's MTN Group Ltd. was scuttled after Mukesh said he had the first right to buy shares in his brother's company.

"Foreign investment is going to be easier," said Chirag Shah, a Mumbai-based research director at IDFC Securities Ltd. "Earlier the agreement between the two brothers restricted Reliance Communications from doing a lot."

Fiercest Fight

Their fiercest fight was over the natural gas field in the Bay of Bengal, off India's east coast.

The Supreme Court this month ordered the brothers to rework a gas-supply agreement that Anil Ambani said entitled his Reliance Natural Resources to buy fuel from the KG-D6 gas field at below a government-set price.

The court ruled that the two firms must reach an agreement on a new contract within six weeks of the start of talks.

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net