Reliance Power Limited (RPL) IPO: All about Brand Power

Fair price per share = Rs. 130
Brand power per share = Rs. 320
Price per share = Rs. 450

Most brand valuation methods are biased towards ‘sales generation’ potential of the brand. Lux brand is to be valued by the no of units of soaps that can be sold under the brand and the premium price it can command because of the brand.

Now there is “RELIANCE” brand. Unlike other brands it’s not about the no of units of product it can sell but no of shares it can sell and the price premium it can command. And then you need to be a financial wizard like Anil Ambani (ADA) to be able to actually convert brand power into cash. He has created an unprecedented buzz around the IPO. The whole power sector has been re-rated after his big ticket IPO announcement. He had played his cards amazingly well – from making the Investment Bankers (IB) to toe the line to grabbing headlines he has done everything right. The “Power On. India On” campaign is also neatly done. The advertisement has that ‘energy’ about it which generates excitement.

However, there is a problem. Although he shares the ownership of the ‘RELIANCE’ brand with his brother Mukesh Ambani (MDA) he alone is reaping benefits through RPL IPO. In fact bad performance of RPL IPO can seriously dent the valuation of RELIANCE brand and that would affect both the groups. MDA in his speech to employees on the occasion of father’s 75th Anniversary stated that the group has always believed in doing first and talking about it later and will maintain the same in future. It made me wonder whether he was hinting to the reverse strategy being followed by his brother in case of RPL IPO.

The most admirable part of ADA’s wizardry is how he made the IBs toe the line. Deep inside everybody knows that the issue is highly priced but nobody has the guts to speak up.

One of my investment banker (IB) friend remarked “I had never felt so ashamed of my profession like this time. None of the investment bankers have the guts to stand up and tell ADA that pricing is ridiculous. Everybody is hoping that somebody else will bell the cat”.

Another remarked “I always thought I understand the markets well and then something like this (RPL IPO) happens and I realize that markets are too irrational to understand”.

Another remarked “Since Reliance IPO announcement, Power sector prices are not marked to Earnings but to Vision!!”

The world of IBs, where people have the competence to see beyond the brand wrapper has been silenced by awe of ADA and greed of business / money.

But beyond the IB world there is a world of small investors who swear by the “RELIANCE” brand name. I am not sure if even half of them understand that ADA and MDA groups are two different groups now. They don’t understand the nuisances of valuation business. What they understand is that Reliance group has given mind blowing returns to its shareholders in past and expect it to do the same in future. For them RELIANCE is magic wand which turns to gold everything it touches. A RELIANCE IPO can really drive the whole market crazy. Already there is a mad rush to open new demat accounts as was in the case of Reliance Petroleum IPO. ADA mentioned in one of the press conference that if regulation had allowed he would have offered full 100% to retail investors. However, deep inside he knows that getting retail section over subscribed would be the biggest challenge considering the Rs. 100,000 cap per applications. Around 6 lakh applications (assuming historic avg. of Rs. 50,000 per application) would be required for retail section to get fully subscribed. There are around 1 crore dmat accounts in the country and many of those are in-active. Hence retail section is not expected to get over subscribed by more than 3-5 times in the best case scenario. With huge amount of international money waiting to flow into India getting other sections over subscribed would be easier and most probably would be done in minutes of issue opening.

ADA would require some real hard selling. But few will dare bet against him. I believe he knows the game well and will be able to get his issue subscribed. Great market is already quoting a premium of around Rs. 400. Period starting 15 January would be really exciting. I suggest small investors to keep an eye on the subscription figures on the NSE website and wait till the last day before applying.

Valuation

Present value of future cash flow (FCC) method gives a unbelievingly low valuation. I believe ADA’s valuation has been based on the thumb rule – 1 MW = 4 crores. Hence for proposed installed capacity of 28200 MW he is expecting a valuation of Rs. 1,15,000 Crores. Well for installed capacity that valuation might be ok but for proposed capacity??!! Major chuck of the projects would not start operating before 2013.
Valuation marked to vision!!

Implementation Skill & Feedstock Issue

And how many years it will take ADA to install 28200 MW capacity?! Reliance track record for in power sector has never been great. Check out history of Hirma power project in Orrisa and such other projects proposed in late 90s and early 2000s. Apart from captive power projects Reliance doesnot have a track record of building profitable power projects. 40% of the proposed capacity is dependent on Reliance Industries Limited (RIL) supplying gas from its KGD6 fields. The case is under major dispute and resolution cannot be expected soon. (The relations between MDA and ADA is like India-Pakistan now. Even after 60 years firing would continue at the borders and this gas agreement is one such border. After resolution, ADA would require at least three years to build the plant and other infrastructure like pipeline etc. And although I salute ADA for his Financial Wizardry, I still doubt his implementation skill (click to read my previous blog on his implementation skills).

Yes, Reliance is famous for its implementation skills. But which Reliance? – ADA or MDA? – it’s the MDA’s Reliance which has the implementation skill as its core-competence. Please don’t confuse between the two.

Secondly, I personally believe the future belongs to ‘green power’. Rather than betting on coal and gas for power, sources like Wind and Hydro power should be banked upon. Considering the spiraling oil prices the cost competitiveness of fossil fuel as feed stock in future is doubtful.

Verdict: Subscribe for Listing Gains. Re-enter at Rs. 325 – 350 range.

1. This issue is highly overvalued but RELIANCE brand and ADA’s financial wizardry will see it through.
2. ADA to protect his equity/ reputation in the market will make sure that at least during the first few days market price would be higher than issue price.
3. I would suggest retail investors to wait till last day before putting in money. Check the subscription figure on NSE website. Put in money only after retail section has been subscribed at least 1 time and issue over all has been subscribed 5 times. Remember FII’s can withdraw their money at the last moment, if subscription figures are below expectations as they did in Cairn India issue.
4. Apply under full price option. Dont go for part payment option. It would provide an opportunity to sell out at the time of listing itself. Otherwise would be stuck with the stock for more than a month.
5. Sell on listing, making as much listing gain as possible. At least free your capital.
6. If you are compulsive Reliance shareholder re-enter the stock at around Rs.325-350 range. I can bet it will touch that level atleast once between listing date and completion of installation of 28000 MW

Spectrum dispute: My solution

The spectrum dispute is here again and quick resolution is required to make sure that growth in the sector is not effected. At the same time solutions should not be a ‘quick fix solution’ which would lead to new dispute after sometime. Lets first define the problem/ objective - what we want to achieve

Objective

I believe, an effective solution should meet following 7 ground rules:

1. Solution should help accelerate the growth in the sector and should increase telecom density.
2. There should be effective utilization of spectrum (being a scarce resource). There should not be any hoarding of spectrum.
3. It should not cause revenue loss to government by benefiting one or few telecom operators. At the same time focus should be on growth rather than revenue maximization
4. The solution should be equitable. At the end of the day all players should be at equal footing and nobody should get unfair advantage
5. There should not be any entry barrier for new players
6. Existing players should not be at a disadvantage. Due consideration should be given to high cost incurred in past by existing players in terms of revenue share, license fee, taxes etc
7. The solution should not create legacy problem. History can’t be changed but it should not become a weight which keep pulling the sector growth rate down. Solution should have flexibility to adjust to changing scenario in future.

Solution

Following is the 3 step solution which I believe meet the ground rule laid above.

Step 1: Existing players should have only 4.4Mhz spectrum in each circle irrespective of technology used. All players who have spectrum in excess of 4.4 Mhz to surrender the spectrum. In circles, if any, where existing players have already exceeded feasible subscriber spectrum ratio additional spectrum limited to the excess subscriber base (in the same ratio), should be allowed to be retained – I believe there is no circle where it has already exceeded. The no of subscriber / Mhz of spectrum ratio should be very strict and set at highest level considering the best practices and best technology available. It should lead to efficient utilization of spectrum. There should be single standard for all technology so that there is an incentive to use the most efficient technology.

Step 2: No distinction should be done between GSM and CDMA technology. Players like Reliance who want to start GSM service should be provided single 4.4 Mhz spectrum for both technology. They might be provided option of surrendering the existing spectrum in case they want to switch technology and the new technology requires another spectrum band. Should not be charged 2nd license fee. Rs. 1651 crores paid by Reliance should be returned.

Step 3: Excess spectrum lying with Govt. should be auctioned with both the existing players and new entrants having right to bid. New entrants would have to pay licensee fee over and above the spectrum bid amount. Existing players can use the spectrum to enhance their network while new players can use the same for setting up new network. This would provide existing players’ fair chance to get additional spectrum if they need it at the same time there would be no incentive to hoard the spectrum. It will also make sure that non-serious players don’t enter the business and hoard the spectrum.

Impact

GSM players might resist step one while Anil Ambani would resist step 2. But seen as a whole the 3 steps make it fair for all the players including new entrants. Third step is providing new players an opportunity to enter at the same time existing player are getting the advantage of free first 4.4 Mhz spectrum to compensate for the past efforts, risk, cost etc. this also takes care of the policy legacy problem.

Conclusion

Couple of years back when the same spectrum dispute was going on I had supported Ratan Tata’s views on paying for spectrum. Here again I am suggesting need of market forces to decide value of scarce resource like spectrum. At the same time I would repeat what I stated in my blog regularly in past – telecom is highly taxed sector and focus should be growth maximization rather than revenue maximization. Govt. should look at reducing other taxes like service tax, revenue share etc. to accelerate growth in the sector.

New game at Dalal Street

The Bubble Maker’s (Mr. Chidambaram) decision of making long term capital gain tax free has led to another black to white game at stock market. Here is how it’s played.

Origin:

As you all must be knowing that all Long term capital gain is 100% tax free while short term capital gain is charged to tax @ of 10% only. How can a government that came to power by advertising itself as the Messiah of “AAM ADAMI” can be so against the “AAM AADMI”. In today’s tax regime speculators and gamblers are not supposed to pay tax on their winnings while people who work hard to earn their living are supposed to pay 30% tax on their hard earned money. Hence even people who used to work hard has joined the speculation and gambling bandwagon. Mr. Chidambaram, are you getting any cut from these stock brokers / promoters etc?

Structure of Play:

The operators in the market search for stock which has limited liquidity (stock in which public holding is very less and most of the stock is locked with promoters). Then they collude with the promoters. Operators inform the promoters of their intention to play in the stock and requesting them not to start selling their promoter stake in open market. Now the operators slowly and steadily pick up substantial chunk of the stock from the open market leading to reduced liquidity and buzz around the script. They start buying aggressively at very high price in small lots creating a frenzy in the market leading to small investors entering in the stock. The small investors who are feeling foolish to have missed out on the Bull Run rush to buy the share and lead to further increase in price.

Once price have increase to 2x – 3x of the original price promoters transfer their original holding in the company from one holding company to another. In the process the original holding company makes substantial Long term capital gain which is not taxable. Hence promoters are able to build up substantial white money in their books. This also help promoters who have black money parked outside India get this money back in India in this falling dollar regime.

Gainers:

a) Promoters
1. Able to convert his back money in white money without paying any tax
2. Able to create enough white money in his accounts even if actually he doesnot have the money (super money). This helps in showing promoter contribution in new projects. (Most of you must be aware how promoters escalate the project cost in business plan to get large amount of bank finance and their actual equity contribution is nil).
3. If the promoter is planning to come up with FPO / right issue / IPO for subsidiary or a group company / share swap for takeover etc increased valuation helps.
Promoter can now raise higher bank loan by pledging shares help by second promoter company. As the cost price & market price of these shares is much higher, banks are willing to provide higher loan against higher valuations.

b) Operators
Operators cash out by selling the shares they accumulated at lower price, at high price making substantial short term capital gain. (People must be aware how these days short term capital gain transactions are being traded between businessman who want to convert their black money into white by paying minimal tax and operators who don’t want to pay any tax. These businessmen show these transactions in their own books and pay 10% short term capital gain tax. Rest 90% becomes their white money. They save straight 20% in tax (30% - 10%) which otherwise is payable for business income. On the other hand these operators are not even required to pay 10% tax as the transactions are made in others accounts).

Losers:

Small shareholders: Small shareholder fearing missing the train buys shares at all price and hold on to it once operators have left believing those shares are really worth that much.
Government of India: Huge revenue loss. Everyday we read newspaper where experts calculate and show the expected revenue loss due to tax benefits provided to SEZ. Why no expert provide a figure to the revenue loss suffered due to charging capital gain at 0% or 10% tax rate instead of 30%?

To test the above theory, try to see the market behavior over last couple of years (since capital gain tax laws have changed). Look at those scripts that have increased the most during this time. And look at the movement of promoter holding between various companies of the promoter. Look at the amount of loan raised against the pledge of shares by promoters. I am sure you will find the connection. Another good test would be whether promoters have made these transaction through market or off market. Capital gain tax advantage is applicable to only market transaction. I cant think of any other reason to do a market trasaction for promoter share reorganization as due to STT its works out costlier than off market transactions.

Probable example:

Reliance: Due to separation of Ambani brothers both group has ‘reorganized’ their shareholding structure. They have done away with the maze of holding companies and have made it more transparent. This entailed several transaction of transfer of shares from one holding company to another. Can anybody work out amount of white money created in the process.

Essar: The group has done lot of reorganization over the past two years. It has also raised substantial loan by pledging promoter holding in various companies. And the Essar Oil and other group stock prices sky rocketed in a very small span of time recently. Smells fishy.

Well, this is just food for thought. Please do let me know your arguements if you believe the above is not possible.

Why DLF IPO is Doomed

The big bang DLF IPO is here again. The price band is Rs. 500 – 550 per share and is offering 17.5 crore shares for subscription. At the upper end of the price band the issue hopes to garner Rs. 9625 crores!!!

And again my prediction is that it won’t be successful. I don’t believe in the real estate valuations and that I have stated many times earlier here. Today I will not talk about valuations. I believe, The size of the IPO is enough to kill itself.

Analysts are wrongly comparing DLF IPO to RPL IPO. They are trying to sell the point that if Indian market can absorb RPL IPO it can also absorb DLF IPO.

Let me argue to the contrary.

First – DLF is no Reliance

Reliance has a 30 year track record of rewarding its shareholders and Dhirubhai Ambani is known as father of equity cult in India. RPL’s parent company had a shareholder base of 35 lakh shareholders (It’s a record; every 4th investor in stock market is a shareholder of Reliance). RPL IPO saw a mad rush for opening D-Mat accounts among non investors. DLF can’t even hope for anything similar to that. DLF is not even TCS, ONGC or ICICI bank.

Second – It’s a Myth that Reliance Petroleum raised 8100 Crores from market through IPO

Fact: RPL has reserved 90 crores shares for RIL of the total 135 crore shares on offer. Which means the net size of the IPO was only 45 crore shares or Rs. 2700 crores.

Third – Not enough retail investors

I believe, everyone one will agree that if Retail part of the issue is not subscribed fully there is negligible chances of upside when the issue lists.

Now let’s do some number crunching.

DLF IPO size is Rs. 9625 crores at the upper end of the price band and is offering 17.5 crores shares for subscription. Around 30% of the issue would be reserved for retail investor. As per the SEBI guideline retail investor can invest maximum Rs. 1 Lac per IPO. Hence if all applicants apply for maximum permission number of shares it would require around 3 lakh applications. Generally less than 1/3 of the applicants apply for maximum permission number of shares. In case of RPL issue it was around 32%. Going by the weighted average method it would require at least 6 lakh retail applications to fully subscribe the retail part of the issue.

Yes, RPL IPO was oversubscribed by around 13.8 times. It meant that total money retail investors provided was Rs. 2980 cr. (16*13.8*45cr*30%). At 100% retail subscription, DLF is hoping to raise Rs. 2888 cr (9625*30%)!!!!

Fourth – Where is the upside?

Even if the IPO managed to escape through like the Cairn India IPO and manage to somehow show 100% subscription by retail investor’s what’s the point of investing? Retail investor would like to invest in an IPO only if he is hoping that the IPO would be oversubscribed many times over and hence would command premium in the secondary market on listing. As shown above it’s very difficult that the issue would be subscribed completely. Hence I don’t see any possible upside in the issue.

Fifth – bad marketing

The one year listing drama has done enough damage to the issue. It can’t command the same confidence it would have a year back. Secondly rumors like – Ambani brothers have joined hands to make sure that DLF IPO is not successful is doing no good for the IPO. I don’t buy the logic that Ambani brothers are interested in relative market cap of DLF with RIL market cap already 2.5 times and RelCom market Cap also more than that of proposed DLF market Capitalization. Such rumors can only harm the issue. Very few like to bet against the Ambani at least on the stock market. Again news of leading i-bank deserting the ship is not taken positively by the market.

Sixth (the most important) – Valuation

Boss, look at the top line and bottom line figures. Do you think public is idiot??

My recommendation to retail investors

Don’t even think of investing in this IPO. And those who are planning of investing in other companies in the secondary market in the next 10-15 days please hold on to your horses. Check out the fate of the DLF IPO & its impact and then enter the market.

Reliance Retail is not about Retail - it’s about Sourcing

If Reliance Retail was all about retail then why would Reliance sell goods as wholesalers to petty retailers who would then compete with its own retail outlets for retail sales? Yes, apart from selling agricultural outputs through its retail chain “Reliance Fresh”, Reliance is also selling goods to retailers at wholesale rate through its subsidiary Ranger Farm Pvt. Ltd.

Every time Reliance enters into a new business people wonder what competence they have for the particular field to be successful. Same questions on core competence were raised when Reliance entered Infocomm business. That time Anil Ambani replied:

“….Our core-competence is Global sized project management, ability to manage the environment and ability to raise cheap finance …bus…..After Jamnagar, Infocomm is like Viagra for our project implementation team ” – Anil Ambani

Since then Reliance has proved its critics wrong and Reliance Infocomm (Now Reliance Communication) has been one of its biggest success stories and is one of the top ten by market capitalization on the Indian stock exchange.

Critics commented that unlike other Reliance businesses Telecom is a customer facing, competitive business and Reliance has no experience in such customer facing business. What people didn’t realized then that Reliance was not entering the Telecom business it was entering the Infocomm business. Reliance’s core-competence is mega infrastructure creation and in Infocomm business too it was doing just that, unlike its competitors. While other telecom operators were fighting for licenses Reliance was silently building 80,000 kms of world class optic fiber backbone infrastructure which it later planned to leverage for its telecom and other information and telecommunication business. The basic strategy was clear – Make huge capital expenditure in efficient and time bound manner, minimize operating expenditure, add to that economy of scale and vertical integration. Result low per unit operating cost at high volumes of operation.

Reliance is doing the same in its retail business. Reliance retail is not about retail it’s about sourcing. And unlike other retail companies Reliance focus is on agricultural products retail – fruits and vegetables. Ofcourse it would operate in all forms of retail but the focus clearly is ‘Fresh’.

“There is more arbitrage opportunity in Agriculture than in Software”

– Mukesh Ambani (Money Life Magazine)

Reliance has started its retail offensive with launch of Reliance Fresh in Hyderabad. It was followed by launch in Jaipur. Soon it would be launching Fresh stores in NCR and Chennai.

If in Infocomm it was optic fiber infrastructure they were betting on, in Retail it’s the logistics infrastructure they are betting on. India has a major problem with its logistics infrastructure. And in problem lies opportunity. It might sound cliché buts it’s very true – let’s discuss how.

All competitors of Reliance in retail business would be facing the same logistics problems which Reliance would be facing. The problem list includes:

1. Outdated agricultural techniques
2. Presence of too many intermediaries
3. Absence of economy of scale
4. Lack of roads to transport goods
5. Unorganized trucking business
6. Inefficient railway system – PSU style operations
7. Lack of cold storage infrastructure
8. Lack of proper warehouses
9. Other form of transportation relatively unexplored
10. Absence of good ports
11. Absence of cargo airports
12. Inefficient & restrictive tax system

Now lets us look at some of the core competences Reliance has:

1. Project implementation skills
2. Finance power
3. Capability to ‘Manage the environment’
4. Vertical integration

Other key advantages it has
1. Scale of operations
2. Confidence in group capabilities
3. Out of box thinking / visionary leadership

If we match the problems with Reliance’s core-competence and its other key advantages we get the following result

Problems - Skills of use (Control)
1. Outdated agricultural techniques - Scale of operation, finance, project implementation (Medium) 2. Presence of too many intermediaries - Vertical integration, Managing the environment (High)
3. Absence of economies of scale - Scale of operations (High)
4. Lack of good roads to transport goods - Project implementation, Finance (Low)
5. Unorganized trucking business - Project implementation, Finance (Medium)
6. Inefficient railway system - Project implemtation, Finance, Managing the environment (Medium)
7. Lack of cold storage infrastructure - Project implementation, Finance, Scale of operation (High)
8. Lack of proper warehouses - Project implementation, Finance, Scale of operation (High)
9. Other modes unexplored - Visionary leadership, Scale of operations (High)
10. Absence of good ports - Project implementation, Finance, Scale of operation (High)
11. Absence of cargo airports - Project implementation, Finance, Scale of operation (High)
12. Inefficient & restrictive tax and laws - Managing the environment, scale of operations (Medium)

This shows that Reliance has a sustainable competitive advantage over its competitors. Very few competitors can match Reliance on most of the skills.

It might make us feel that Reliance has unfair advantage over others. But if you think that way you are a pessimist / communist. There is a positive way to look at this. Till date whenever Reliance entered any sector it lead to rapid economic growth in that particular sector and one or two associated sector. But this time many sectors are going to be effected by this initiative. It will revolutionize many sectors like – agriculture, road, rail, sea transportation, aviation, warehousing etc. It opens sea of opportunity for all of us to start our own businesses associated with these sectors. And that’s why Newsweek recently mentioned that Mukesh Ambani might just spark the next Asian boom. People who have guts would get into associated businesses and prosper, rest would cry foul at Reliance’s growth.

Zapak.com – New offering from ADA stable

This is one campaign in recent time which stands out. After the brand revamp of Reliance ADA group & Big FM launch I had almost written off ADA groups marketing team and Mudra advertising agency (Mudra is owned by ADA). But Zapak has forced me to think again.

Lot had been written about the ADA group’s Reliance logo and I would try to restrict myself. I think the color and font is pathetic. Only focus is on the “A” letter, and it has been done to symbolize Anil Ambani’s initials. Infact the focus on the letter A suggest that in near future he might be planning to drop Reliance word altogether and retain only the ‘A’. Rs. 700 crores was supposedly spent on the brand revamp and except for the advertisement featuring Amitabh Bachchan nothing was worth writing home about. “Infocomm” was a more appropriate word and re-branding to ‘Communication’ has just erased the distinction and limited the future possibility (I hope this is not limitation of vision). Same is the case with “Webworld”. There was no reason to change the name to ‘shop’??!! Again ‘Reliance India Mobile’ to ‘Reliance Mobile’ (in this case both versions are equally bad). I believe the only intent behind these name change was to erase big brother’s marks on the company. But he should have been more creative.

Similarly the ‘Big’ FM campaign is unimpressive. First – the word ‘Big’ itself is irrelevant. It’s like ‘Smart’ brand for the Reliance GSM service, I am still figuring out why the word was used or it was just the first English word they came across that day. Although Abhishek Bhachan’s presence had provided some visibility but I think he was not properly utilized. (Motorola did a great job with him).

Now Zapak. The work ‘Zapak’ is a well thought word. Although the word is not there in the dictionary - it communicates the gaming attitude. The colors, the font, the punchline – everything is well thought out and eye catching. And the best part is the advertisement campaign – specially the print advertisement.

My favorite is the 'toilet' advertisement below. The company has improvised on it and in many multiplexes has put stickers in toilets to this effect. Great way to catch your target audience at the place where they can’t take their eyes off. There are couple of other good print advertisements too.

Another noticeable thing is where Reliance Infocomm (sorry Reliance Communication as it is called now) is headed. Focus is no more on broadband and Netway project (Video on demand). Recent ADA moves suggest focus on GSM, Mobile stock trading and Gaming. Mobile stock trading and gaming are both what I call ‘addition business’ targeted at different age group. Infact voice (telecommunications) is also becoming an ‘addiction business’, with a specific segment of population talking for the sake of taking (Reliance communication’s - what to do with 2000 minutes campaign is indication of that). So, while the old Reliance was entering businesses where there was unsatisfied needs the new Reliance is creating demand where there is disposable income. The target population has completely changed. Mind you it’s a great strategy especially in developed world where basic demands have already been fulfilled. And of course these addiction businesses are not unsocial like cigarette or alcohol business, but provide you with loyal customers who guarantee regular cash flow.

Zapak is a big way forward and with the Reliance Webworld (sorry Reliance shop) infrastructure to back it would prove another great move by ADA. I have checked the website - C0llection of games, sorting, interface etc. is very good. A little more focus on broadband can further his interests. Again broadband is a business which need more implementation skill and is more information (or Data) oriented than Communication (Voice) oriented. MDA selected the name Infocomm because he wanted to communicate equal focus on both Voice and Data. ADA’s recent move suggests limited focus on data which might not be a great strategy considering the amazing optic fiber infrastructure the company has.

Even at $20 billion Hutch is worth it for Reliance Communications

The best thing about Anil Ambani is not that he is one of the best negotiators and a financial wizard but the fact that he knows his strengths. Anil know that if he has to grow really big he has to leverage his core competence of cracking deals and Hutch deal should be the epitome of his skills.

Takeover of Hutch makes great sense for Anil Ambani. It not only provides an opportunity to enter GSM in a big way and become the biggest telecom operator in the country but it also has lot of synergies which is not available to other suitors.

Hutch has GSM operations in 16 circles where Reliance Communications (RelCom) doesnot have operations and only West Bengal and Kolkata is the over-lapping circles. Hutch has high revenue per minute and ARPUs are also better. Hutch has the advantage of operating in 800-900 Hz band in most circles, advantage which only initial operates have as all new operators are given spectrum in 1800-1900 Hz band. Hutch has around 2.2 crore high end GSM customers which added with 2.8 crore customers of RelCom will increase RelCom customer base to 5 crores.

Apart from this Hutch has premium brand image (and in all probability the successful bidder would have the rights to use the Hutch brand for around 3 years). RelCom on the other hand has Webworlds (now Reliance phone shops) spread all over the country which can act as a good retail touch point for all Hutch customers too. And above all RelCom has 80,000 kms of optic fiber infrastructure which can be utilized by Hutch to cut substantial part of the carriage cost, having direct impact on the bottom-line.

The two companies can also share each others towers and other passive infrastructure. RelCom has invited GSM equipment bid which is estimated to cost around $ 7-8 billion. RelCom by taking over Hutch would be saved this expenditure apart from getting revenues from day one. RelCom would also save on advertisement and marketing expenditure and exit of one major competitor from the market would reduce the pricing pressure. The deal would also shift the telecom market from the price war mode to consolidation mode. Having both CDMA and GSM operations would also provide opportunity to provide other value added services like dual service (CDMA & GSM) on single phone, mobile stock trading etc. RelCom can also extend the free calling to own network scheme to Hutch customers leading to increased customer pull.

The Numbers

At relative realistic Rs 35,000 per subscriber value of Hutch come to Rs. 77000 crores or $17.1 billion. Today Airtel is valued at around Rs. 40,000 per subscriber. At Rs. 40,000 per subscriber the enterprise value of Hutch is $ 19.6 billion. Hutch has a debt of around $ 1.6 billion on its balance sheet which means net equity valuation of $ 18 billion. Considering the synergy and premium for becoming the biggest player in the market $ 18 billion would be an amazing deal for Anil Ambani and even at $ 20 billion (which is little stretched) he would come out winner.

I don’t want to bore the readers hence I would not go into too much details. But I would like to state that Rs. 35,000 – 40,000 per subscriber valuation although might look steep (100x of ARPU per month) but is fair considering the growth rate of the telecom sector which is around 40% per annum. And I would like to reiterate what I have stated in many of my blogs earlier – in 5 years time voice would contribute only 10% of the total revenue and rest 90% would come from data & other value added services. Hence today the focus should be on tying up as many customers as possible. And hence I have based my total valuations on number of subscribers rather than EBITDA etc.

Competition

Others players who are being named as probable candidates are Vodafone, Maxis, Airtel and Essar. Vodafone appears to the next best candidate for the deal after RelCom.

Essar: Essar does not have that kind of money and I can bet they can’t arrange that kind of money. Infact they have stop considering takeover as an option. The option in front of them is to retain their current share or sell it out at substantial premium. Their expected strategy would be as follows:

• In case RelCom is the front runner – Ask for substantial premium to sell out. They may ask for 10-20% premium per share over what RelCom pay to Hutchison for their share.
• In case Vodafone is the front runner – They may dilute their stake to 26% by selling the rest 7 % at substantial premium and hope of getting even better deal later. In case they don’t get a premium over the Hutch selling price they may retain 33% which would make Vodafone uncomfortable. Vodafone to reduce the nuisance value may like to buy out Essar completely and park the mandatory 26% with some other Indian company for the time being. However, it would be difficult to find a promoter who can shell out that kind of cash. And regulator would not allow eye wash deal where the Indian promoter is just a sham.

Vodafone: Vodafone is the second best candidate in the race after RelCom. Vodafone is very keen to enter Indian market and therefore invested in Airtel. But substantial stake of Singtel in Airtel has restricted them till date. Vodafone will have to get Airtel’s no-objection as they have non-compete agreement with Airtel. However, it is not expected to be a big problem. Airtel may give no-objection in return of some financial gain or might just give it for free to increase RelCom’s problems. Vodafone on the other hand might reduce the stake only to 9.9% from the current 10% to meet the regulatory requirement. It would also keep the option alive for merger between Hutch and Airtel in future.

Maxis: Maxis donot appear to be a serious candidate right now. Secondly there is not enough synergy benefits as Hutch and Aircel has many circles in common.

Airtel: Airtel also is not serious contender. Firstly, Sunil Mittal being a first generation entrepreneur do not has the financial resources as required in this bidding battle. Secondly he has other new businesses like retail to focus his resources on. And above all as Airtel is present in all the circles there is not much synergy benefit. Infact merger would entail surrender of scare spectrum which would make merger value destroyer.


Funding the LBO

For Reliance funding the Leveraged Buy-out (LBO) should not be a problem. Reliance brand name and Anil Ambani fund raising skills is something few doubt in the financial markets. As per media reports he has already tied by with 5 banks for $ 5 billion each for this deal. And with private equity funds like Blackstone and KKR on his side Anil Ambani has little to worry on this end. (Please note – Blackstone India head Akhil Gupta was part of senior management team in Reliance Infocomm during Mukesh Ambani’s time and is a close friend of Anil Ambani).

Considering the foreign borrowing option (especially from Japan) and unlevereged RelCom balance sheet Anil Ambani might be able to raise funds as low as 6%. At 6% interest (and $20 billion loan), cash outgo annually would be Rs. 5400 crores. Cash profit for the combined entity for the year ended 2007 is expected to be 1.5x of this amount.

He might also dilute his personal stake in RelCom from 66% to 51% to fund this takeover. His 15% stake in RelCom can easily fetch him around Rs. 15,000 crores or $ 3.3 billion. I doubt that he would join hand with Maxis for the bid.

Management

Anil Ambani unlike most other entrepreneurs’ do not fancy having day to day management control over businesses and he has too many things on his plate to work full time on one business. He might retain Mr. Ashim Ghosh and his team for the day to day management however ultimate power would always lie with him and his close circle.

Roadblocks

The two major road blocks Anil Ambani need to look out for is:

• Essar group might act pricy: Essar group might ask substantial premium per share over and above what is paid to Hutchison. As per the TRAI guideline no company can hold more than 10% stake in two different operators in the same circle. Hence the only option in front of Anil Ambani is the merge the two entities which would make 33% stake of Essar critical. Essar knows this very well and they know until unless they sell out this deal can’t go through. Essar may also demand 15% stake in the final entity, which going by Essar’s track record Anil might not be willing to oblige.
• Regulatory hurdle: As everybody knows Anil Ambani is not in good books of Sonia Gandhi and has missed major business opportunities in the recent past due to this reason. Regulation provides enough ammunition to stall the deal if they want to. Another critical factor would be the amount of spectrum the combined entity would be allowed to retain after the merger. If Rel Com is made to surrender substantial part of the spectrum this deal might not make sense.
  

I wish RelCom best of luck. This deal can push RelCom to the big league and it deserves to be there. I would like to reiterate here – in 5 year time voice would contribute only 10% of the total revenue and 90% would come from data and other value added services. RelCom optic fiber infrastructure is major sustainable competitive advantage which it can leverage better once it has higher number of subscribers. Hence even at $ 20 billion Hutch is worth it for RelCom.

Just watch out for RelCom!!

New Twist(25 Dec 2006): As expected Essar is trying to get premium of 10-15% per share from Anil Ambani (ADA) as they know until unless they sell out Anil can’t go ahead with the deal under current regulatory environment.

Hence great negotiator that Anil is has come up with a new plan. The 66% stakes of Hutchison Woampoa maybe bought by the Private Equity firms combine which include – Blackstone, KKR etc. This would help ADA avoid Essar stalling the deal. Later with 66% voting right it won’t be difficult to teach Essar a lesson and force them to move out. Blackstone and KKR will ofcourse get its pound of flesh for the same and may take 16% stake in the resulting company after merger.

Essar's Bluff (Jan 3, 2007): There are news reports that Essar has managed to tie-up with I-Banks for $20-25 billion. As I mentioned before I can bet Essar cannot manage that kind of amount.
And if I-banks are really ready to lend then I request them to please read this - Essar has all its assets already pledged to lenders and their track record in loan repayment is well known. However, the biggest problem is the intent shown by the promoters. They were the first Indian company to default on foreign loan and their problems are far from over. Due to upturn in steel cycle it might not appear so but please note they have not used the opportunity to clean the house. They have restructured the old loans just to avoid being classified as NPAs.
Most important thing worth noting is - they are managing to pledge the same asset to lenders many times over and surprisingly the lenders are not noticing it. (This is glaring example of hollowness of MBA (Finance)'s course curriculum). Essar is pledging the shares of telecom holding company (Essar Teleholding Limited - ETHL) to one lender and shares of the holding's holding company (Essar Telecom Limited) to another apart from pledging shares in Hutchison Essar Limited. Ultimately underlying asset is the same and the same asset can’t be pledged twice. But somehow target oriented mindset of today’s bankers are ignoring this fact. If any bank lends money to Essar for acquiring Hutch shares it would be digging its own grave.

Revolution every 4 years

The thing that separates Reliance from any other company is its ability to enter & revolutionize a new sector every 4th year. In late nineties it was the Refinery (Jamnagar), in early 2000 it was Infocomm, then Oil and Gas exploration and now Reliance Retail (Reliance Retail initial pictures below). Next would be Mega cities (SEZ).


Added to that, they are bringing down the ‘new revolution time’ with each project. Currently they are working on 5 mammoth projects - mammoth for any company anywhere in the world.
1. Reliance Retail (Rs. 27000 crores)
2. Reliance SEZ (Rs. 50000 crores)
3. Reliance Oil & Gas exploration (Rs. 35000 crores)
4. Reliance Gas pipelines (Rs. 15000 crores)
5. Reliance Jamnagar Export Refinery (Rs. 27000 crores)

Which company in the world can take up the project of building world’s third biggest refinery in record target time and still manage to leave it on auto pilot? I doubt even Exxon and Cevron of the world can do that. But for Reliance’s top management its “been there done that”. They have bigger things to concentrate on.

In my earlier article (Stretch & Leverage ) I have mentioned – ‘They operate on the general military philosophy that no matter how strong you are you never open too many fronts for war. And when at war your best people are out there fighting the war while home affairs can be looked into by lesser mortals.’ Today they are so confident that they are opening 5 fronts at a time. It’s this “guts” that separate Reliance from others. Only other company which I believe can match up with Reliance in terms of “Guts” is Google - which also has a habit of creating revolutions at regular interval.

P.S - Writing the word Revolution with ‘s’ in the end is making me wonder whether I am using the word revolution too loosely but then I believe calling these projects anything less than revolution would be insult to these projects.

Reliance Communication's judgement day!!

I had been asked often why I am so bullish on Reliance Communications (Estwhile Reliance Infocomm). I always said its beyond Communication and the Infocomm word was the right word to define it. Although Anil has removed the word from the name of the company thankfully he has not changed the company plans.

Read this link. It might well be the the start of the revolution I had been waiting for:

Its cable tv, telecommunications, broadband (and much more)all rolled into one.

There are parts of the article which I am not clear about and would ask Reliance Communication to clarify:
"The global operators we are going to sign, in turn, are appointing franchisees which are the cable operators and they move into each and every home and office", Tambe said. "We are launching simultaneously in India and some other countries, including the US".

Now its test of Anil Ambani's implemetation skills. He has the killer application in his hand, he just has to make sure that he price it right and push aggressively to reach critical mass.

Anil Sir, wishing you success.

How can you worship Reliance of all things??!!

Today I will answer this. I am sick of everybody asking me this question. Nobody is able to understand how I can worship a company in the first place and that also a company like Reliance that unlike Infosys and TATA group is infamous for its business style.

Everybody has a religion and a God. I am not talking about the religion one is born with but the religion one is passionate about. And, as far as I know, India has three major religions – Cricket, Cinema & Politics.

Cricket is like the Hindu religion. You have an extensive list of Gods to choose from; led by the holy trinity of Sachin Tendulkar, Kapil Dev and Sunil Gavaskar.

Cinema is another religion that is not far behind when it comes to the list of available Gods to worship. The most obvious choice being Amitabh Bhachchan followed by the others like Sharukh Khan and the rest.

Next comes Politics. Its like the Muslim religion – Acts of select few has brought bad name to the whole religion to an extent that a major section of the society looks down upon this religion and wish that religion should be banned altogether. But yet is a very powerful and influential religion that would last till the end of mankind and we can’t ignore its existence. And like all religion it also has its share of Gods. Mahatma Gandhi being the biggest one having the stature like that of Prophet. Most others are small time leaders who pop up on the scene from time to time, few of them by leveraging Gandhi’s name.

I donot belong to any of these major religion. I belong to a minority religion called “infrastructure”. I know most of you have not yet heard of this religion. It is a very small religion with very few followers and unlike a few other religions we do not believe in forcibly converting people.

What is this religion all about? This religion believes that only real development of India is possible by improving infrastructure. It believes lack of infrastructure is the biggest bottleneck and the only thing that is not allowing this country and its people to live up to its potential. This religion aim to create state-of-art infrastructure in the country and give its people an opportunity to take on the world. This religion also believes that infrastructure can be built without any subsidy, just on commercial terms. All it requires is - government should not create artificial road blocks like taxes, licensees etc. All we want from government is to stay off as they did with the software industry in the initial phase.

Now tell be what options do we have for God of Infrastructure.

A company that built the world’s biggest & most efficient petroleum refinery making India net exporter of petroleum products (most of us have forgotten what oil shocks did to our economy to appreciate that).

A company that had guts to create 80000 kms of optic fiber infrastructure in matter of 12 months linking each and every corner of the country and making telecommunication affordable for the masses.

A company that would provide solution to electricity problem, a problem that should have been solved long back.

A company that is building cities that will give Indian an alternative to Mumbai and its crumbling infrastructure. (I still don’t understand how people manage to live in a city like Mumbai. Traveling everyday for hours just to reach office in crowded dilapidated trains in conditions that are not fit even to carry animals).

A company that is creating retail infrastructure that the whole country is waiting for.

A company that is building ports, roads, airports, power plants, cities and everything that government should have done long back but failed to do.

As far as I can see there is only one God of Infrastructure – Reliance or Dhirubhai Ambani, the man who created this company. And that’s why I worship him.

Jamnagar refinery visit

People who have read my earlier blog “My failures and how I feel about them now” (http://neerajgutgutia.blogspot.com/2005/09/my-failures-and-how-i-feel-about-them.html) need to read this.

As you know I have joined Reliance now. And as part of the induction program I was taken to Jamnagar for a visit. I couldn’t help compare the last experience and this one. Last time I traveled all the way from my home town to Jamnagar changing train thrice on the way. This time I flew from Mumbai directly to Jamnagar in Reliance’s own plane. Last time I was not allowed to enter inside the refinery gate and this time I was given a VIP pass. I was not only shown around the refinery but also the mango farm, the jetty, the township and night visit to the plant. And I must admit it was worth the wait …(5 years!!!)

One of my colleagues there at Jamnagar described it as a visit to Jurassic Park where every thing is so big that gives you a very humbling feeling. To give you an idea of the size of the plant ….

One of the oil storage tanks is as big as a football field!!

Inside one of the pipeline you can drive a Maruti Zen!!!

During our visit our guide was so regularly mentioning about different units of the plant being world’s biggest that one of our colleagues asked him to mention only when it’s not the biggest in the world.

That was size…but the most interesting part is the efficiency. Most plant operates at 130 – 150 % of their rated capacity. And when you ask them how is it possible you are looked at as if asking – isn’t that expected?

And the experience ….

The 4 km long jetty over sea is a great drive. You feel that you are riding in air just above the sea with fresh air hitting your face and nothing but sea all around you. I wish I was allowed to drive there :(

The mango farm with 1000 or so variety of mangoes is something worth watching too. You can see mangoes of different color (including brinjal color) and sizes. The surprising part - the height of none of the mango plants was more than mine. In mango plantation too you can experience Reliance trademark innovation. The productivity is many times the benchmark. They have used in-house technology for retaining moisture, watering etc. to increase productivity per unit of land.

The township is not only well planned and big it also state of art. To just give you an idea – it has a floodlit cricket field inside it!! Apart from that of course you have hospital, school, club, temple etc.

The rail terminal had capacity to load 64 racks at a time. The truck terminal for liquids is even bigger… I can just go on and on.

The plant is a treat to watch in the night. Cameras are not allowed in the refinery otherwise I would have posted pictures. The night drive inside the refinery is something only lucky few can experience and I must tell you it’s just out of the world.

After his visit to Tajmahal Clinton remarked ‘There are two kinds of people in the world. Those who have seen it and love it and those who have not seen it and love it’. My feeling is similar - I loved Jamnagar before I have seen it and I love it even more after I have seen it. For those who will never get an opportunity to see it...well you have missed something in life.

Acid test for Anil & Infocomm

Three years back I suggested that Access Deficit Charges (ADC) should be charged on revenue sharing basis rather than per minute basis. Finally with effect from March 1, 2006 ADC would be charged on revenue share basis and not on per minute basis. So is the revolution set to happen as I suggested?

For my prediction of Rs. 500 per month for unlimited calls still we have long way to go. We need to shift to “bill and keep” which will still take sometime. But yes movement towards it can surely start any moment now!!

With Reliance Communications Ventures listing due early next month we can expect some real action in the next fifteen days. I believe Reliance Infocomm or Reliance India Mobile (RIM) should soon come out with a scheme offering unlimited call to all Reliance phone any where in a country for a monthly rental of around Rs. 700. In fact till sometime back Reliance was offering this scheme on its WLL phone which they had to withdraw, as ADC was made applicable on WLL phones too.

Offering this scheme on mobile would have a chain reaction destabilizing the current dynamic equilibrium in the telecom sector and ultimately equilibrium would be restored only once fixed monthly rental for unlimited domestic call to any phone happens. Once RIM offers this scheme, Tata Indicom will follow soon and then all operators will be force to follow as happened after the launch of “Lifetime” schemes. Once all operators start offering this scheme “bill and keep” would logical next step. However this would face stiff opposition from GSM players who would be at a disadvantage considering the technological limitation of GSM. They might try to form a cartel and it would be test of Anil Ambani’s competence how fast he is able to break that cartel. Of course launch of IPTV, broadband, video on demand and other such services would add color to this battle. At the end there might be new leaders in the sector. Currently CDMA technology seem to have a upper hand in this upcoming battle and considering Tata Indicom past history this is the big chance for RIM.

But we should not downplay powerful GSM players like Bharti & Hutch. If they are able to accelerate the transition to WCDMA they might just beat the RIM threat forever. GSM players can also take heart in the fact that now Anil and not Mukesh controls Infocomm. Anil is new at the helm and has his attention spread on too many things. Will he be able to come up victorious in this upcoming telecom battle? This is his chance to become the biggest player in the Indian Telecom market.

We will soon get answer to two questions we have been debating for long:
Which is better CDMA or GSM as a technology?
Is Anil Ambani competent enough to handle Infocomm?

Non – compete agreement (NCA) – I (Telecom)

As discussed in my blog earlier NCA is the most interesting document in the Ambani Vs Ambani saga today. This ten year agreement is not only of great consequences but it’s also a window to vision of two brothers.

It is quite clear now that the war between the brothers is far from over and the look of things suggests that it may go on for years. And every time this war of words break out the most important document will be this NCA. I wish I could lay my hand on the original draft of the NCA, but meanwhile I would rely on news reports for my analysis. So, this is my first of the many blogs on NCA I would be writing. This focuses on telecom.

According to the NCA – Telecom is the sole domain of Mr. Anil Ambani including entertainment like multiplex, amusement parks etc. except content. But elsewhere in the document it is written that Anil Dhirubhai Ambani Group (ADAG) will have to give first right or refusal to Mukesh in case the group sells a part or whole of any of the businesses. Secondly it also mentions that once a part or whole of it is sold the NCA would terminate and Mukesh can then enter and compete in that business. Now that closes the option for Anil to sell out at high valuation as suggested by my blog earlier. But then it also creates a situation for an interesting possibility.

Reliance’s lesser know telecom venture – Reliance Telecom provides GSM based telecom service under the brand name Smart. It doesn’t make economic sense for Anil to operate on both technology platforms. So what option does he has? He cannot sell out as then Mukesh will be free to compete in telecom & entertainment. And as per DoT guidelines anybody should not hold more than 10 stake in two operators operating in the same circle…. Recently Tata’s have been issued a notice for operating both Idea & Tata Indicom and they have given assurance that they will sell out of Idea. Suppose a similar notice is issued to Anil bhai what will he do? The only option he would be left with is close down the business which is generally not aa viable option considering regulatory environment & financial implications. If he still try to go ahead and sell it not only Mukesh will get the right to re- enter the telecom & entertainment business but Anil would also have to give Mukesh first right to buy Reliance Telecom. And please note I am mentioning Entertainment business along with telecom. Mukesh might not be too keen on starting all over again in telecom but entertainment is something he surely will be interested in. Watch out for my other blogs on NCA to get the whole picture of the fight ahead.a

Should Anil sell out of Infocomm??

Vodafone recently bought 10% stake in Bharti for around 7300 crores…which mean a valuation of Rs. 73000 crores that too without any controlling right. With controlling rights the price would have been even higher. Reliance Infocomm (RI) considering its intrinsic strengths will be valued higher than Bharti. International telecom players are looking to enter the Indian telecom market. Even Virgin group is willing to enter but there is no spectrum on offer and only route to entry is acquisition of existing player. Anil Ambani’s personal stake of around 66% in RI can easily fetch him Rs. 60000 crores!!!

Anil Ambani is a ‘finance wizard’ and his recent acquisition spree suggests that he dreams of becoming “the Indian Warren Buffet” and want to make Reliance Capital (RCL) the next – Bekshire Hathaway (BH). To be frank it suits him. Telecom is a full time business and requires skill set that his brother has not he. Anil Ambani needs time for his early morning jogging, late evening parties, politics and holiday with celebrities. And then his hand is already full with the full time job as MD & CEO of Reliance Energy.

It will make lot of sense for him to sell out Reliance Infocomm. With Rs. 60000 crores cash in his pocket and his funding skills he can make RCL much more powerful in Dalal Street than what BH is on Wall Street.

Given a choice I think Anil would have done it. The way he has managed RI after the settlement is nothing to write home about and even the im*****t Tata is performing better. He knows his limitations. But the problem is – if he sells out now it would be like admitting that he is less capable than his brother. Everybody including me will pass the judgment that he was incompetent to manage RI and that is something he donot wish to happen.

So what is the alternative in front of him –
Partner with some international telecom giant and act as a sleeping partner
Sell out and answer the critics with RCL performance
Hire a competent team to manage RI and himself concentrate on REL and RCL.

Lets wait and watch to see what he does. Mukesh, public & myself will hate him if he sells out of RI but today that is the most logical thing to do and that is what he will do. I wish he proves me wrong and help RI live up to its potential but I doubt he has the capability to do so.

I told you so - Reliance to build SEZs

, I hate to do it.....but then you have to explicitly tell people to make them realize that you actually did it. Only 3 people till date called me up to say ..." hey Neeraj ...how did you knew that Mukesh will get into the business of building SEZ.....or he actually liked your idea and went ahead with it!!!"

Well it would be wishful thinking to believe that I was the one who gave him the idea of MEGA CITY (http://neerajgutgutia.blogspot.com/2004/05/next-pill-of-viagra.html). To be frank, his recent decision of going to B Schools for recruitment and the $5 billion business plan contest at IIM A urge me to claim that the idea was originated by me. Why else a man who had little faith in B School grads of India suddenly reverse his recruitment policy and also seek business idea from novices? Has one such novice from one such B School socked him with his business plan? The idea had been there on my blog for more than a year. It was published in I Mag 8 months ago and the same idea was selected for an IIM L contest (- "what next for Reliance?") last year – it might be that someone from his close circle came across it somewhere…

But still I would just say that it was the next logical step for Reliance group.. and Mukesh & his team must have thought of it themselves. Even if I cant prove that I gave Mukesh the idea, atleast I have proved my claim that I have the capability to "dream at the same wavelength" as Mukesh!!!

My failures and how I feel about them now

Was just recollecting moments when I have reached very close to my target and then didn’t quite made it. Things I have worked hard for…meant a lot to me that time… and now what I feel about them

Getting into SRCC

Would have looked good on my CV….but KMC is something that made me…the initial adverse situations…hostel…ragging…politics…I don’t think I should have missed that learning….and man I relish every moment I spent there….and I have enough big names on my CV now …

Getting into IIM A

Well IIM I was the best thing that happened to me…I think I was very lucky to get into IIM I. And man I tasted my first 100% success there…I mag…I managed to do it as I have dreamt it….will exchange nothing for that one moment…Thanks God for I and not A. And few might agree the kind of people I made friends with at I, I am sure were not there even at A. Just watch out for our batch…It will make IIM I proud.

Getting into Jamnagar refinery

Well this is the funniest of all. I was told that my mother had wished that if my father clears his CA exam they would visit Tirupati mandir. So I also promised myself before my CA exam – If I get through I will go to Jamnagar refinery of Reliance (“modern temple of India”)
I stuck to my promise when I got through….within a week of clearing the CA exams I was off to Jamnagar…around 3000 kms from my place. Only to be turned away from the gates…still dream of getting inside…it still inspires me….its about to become even grander will planned doubling of capacity…will visit the temple soon…very soon…

Publishing my article in Business World

Man I had never been so close to my dream like that moment…I was almost there…I believed that one article of mine can open all doors for me in future…I would be able to prove my potential…I has a feeling that I have arrived….and then it came crashing down…the call from Reliance to my boss at BW…the project shelved…I admit I wept that day…I had worked very hard for that and had put my career at risk for that…I almost made it …but not quite…

But it gave me the fire – the drive to dream of I mag. And as they say failure is the stepping-stone to success…The I mag, which I am very proud of today, is the result of my BW failure …God give me such failures again and again!! During my SP Jain interview I defined success as “opportunity to dream bigger than the previous day”. At BW I was fighting to get one article published…and that failure made me conceptualize a mag…was that a failure??

Job at Reliance

This has been real hard nut to crack. After CA results, I made atleast 50 applications for job at Reliance. Visited atleast 12 Reliance offices in different cities and didn’t even managed to get an interview call from them. Went to the extent off getting into Reliance’s ‘walk-in interview’ meant for engineers, disguising myself as engineer…still didn’t managed a interview call. I think time has come to apply again…….Reliance here I come.

Moral of the story – “Aim for the Sun – You will reach the stars atleast” (in geography classes I have been told Stars are further away from Sun…unlike what was believed by people who wrote this phrase)