Become a venture capitalist to Reliance Infocomm

Dream of making big money at the stock market ...well the history says big money can be made only by venture capitalist who bet big on a company during its initial days....high risk and high return.

Now I will tell you a low risk high return option!!! Return of a new venture and security of a blue chip!!

Invest in RELIANCE INFOCOMM VIA RELINANCE INDUSTRIES LTD.

Reliance industries ltd. holds 45% stake in Reliance Infocomm and another 45% is held by the Ambanis. Now look at the valuation of Reliance Industries Ltd....its not valued enough even for its petrochemicals, oil and gas and Reliance Energy investments leave away Reliance Infocomm. Pull out any stock analyst report and it will mention that separate value of all these Strategic Business Units (SBUs) except Reliance Infocomm is more than the current stock valuation.

So what I forecast: In a year or so time Reliance will be coming out with a public offer for Infocomm. Most of the share on offer will be one held by Ambanis. Of course they will be making a killing on it but the shares will be offered at a very high price in the market (valuation of Infocomm shares is discussed below) which would push up the valuation of Reliance Industries Ltd because of its 45% holding in the company.

Now let’s see the valuation or Reliance Infocomm. Let us take Bharti as the standard. Reliance Infocomm has more customers on its list compared to Bharti. Secondly due to back door entry by Reliance license fee commitment etc is also very low. Above all it managed to make cash profit in the first year of operation itself. Reliance Infocomm revenue today must be around 5000 crores (83lakh customer*500 pm as bill*12 months). And this is only from voice business. Reliance is about to come up with endless businesses leveraging on its optic fibre infrastructure including...broadband, video conferencing, video on demand, Internet protocol TV, cable TV, ATM network facility to banks, Broadcasting facility to channels etc. It is expecting that within 5 yr time voice will be contributing only 10% of the total revenue of Infocomm. And all these does not need much of incremental investment in infrastructure which Reliance has already put into place for voice business like optic fibre, Webworlds etc .Added to this, currently Reliance is operating in only 1100 towns and will be reaching around 5000 by the close of the financial year. This should lead to substantial increase in the voice business (expected to reach 1 crore customer by the year end). Broadband business also should contribute lot of revenue. My estimate is by the end of 2006 it should be at least 1500 crores (25lakh customers*500 per month * 12 month).
Hence by the end of 2006 I expect Reliance Infocomm to touch revenue of at least 25000 crores and a profit of around 10000 crores. Going by the PE ratio of 10 Reliance Infocomm should be worth 100000 crores by the end of 2006. Today total market capitalization of Reliance is around 80000 crores!!! Considering 45% stake in Reliance Infocomm alone should contribute 45000 crores to Reliance Industries capitalization...which means other SBUs like Oil and gas, Petro-chemicals, Energy is worth only 35000 crores!!!

Not to mention you may like to be venture capitalist to Reliance Energy Ltd. also (where Reliance industries hold more than 51% stake) after reading the synergy between the Infocomm and Energy business in my cover story in I magazine.