Anil Ambani, world’s sixth richest in 2008, falls out of billionaire club
Total m-cap of six Anil Dhirubhai Ambani Group firms has dropped to Rs 6,196 crore.
At Monday's market close, total market capitalisation of six Anil Dhirubhai Ambani Group firms stood at Rs 6,196 crore against Rs 8,000 crore just four months back. Accordingly, Chairman Anil Ambani's worth is much below $1 billion. The figure can be significantly lower considering the group has pledged most of the promoter holdings with lenders.
Ambani said last Tuesday that his group repaid more than Rs 35,000 crore of loans in the last 14 months and claimed that all future payment obligations would be met in a timely manner. The very next day, Price Waterhouse & Co, an affiliate of PricewaterhouseCoopers, resigned as the auditor of Reliance Capital and its Reliance Home Finance, alleging diversion of funds and fraud.
Shares of the ADAG group, which had already been falling, plunged further as investors saw no probability of a turnaround in ADAG group companies anytime soon. Ambani has seen his wealth erode in last five years due to the burgeoning debt burden.
Around 12:20 pm on Tuesday, shares of all his group companies were down in the dumps: Reliance Infrastructure (down 9.29 per cent), Reliance Naval and Engineering (down 8.51 per cent), Reliance Home Finance (down 7.55 per cent), Reliance Communications (down 5 per cent), Reliance Power (down 4.91 per cent) and Reliance Capital (down 4.27 per cent).
Ambani sold his 42.88 per cent stake in mutual fund joint venture Reliance Nippon Life Asset Management (RNLAM) last week, which is one of the reasons for sharp erosion of the group's market value.
What went wrong?
"It is a common story of greed and fear. Reliance Communication suffered because of overleverage, and not getting out at the right time. Other group companies had to bear the brunt," said Sanjiv Bhasin, Executive VP, Markets and Corporate Affairs at IIFL Securities.
This damaged shareholders' trust and the group lose 90 per cent of total market capitalisation.
The problem of high leverage was equally acute with other group firms too. "High leverage in low cash-generating businesses with low margins is a case with 80 per cent of his group companies," said Sameer Kalra, Founder, Target Investing.
Bhasin said wrongly structured businesses and mismanagement of collateral selling have been very discomforting for shareholders,
The way forward
Some of ADAG businesses still show promise. "Even now, we think some of the assets are very lucrative, such as power, utilities and the NBFC business of Reliance Capital," says Bhasin. However, a lot will depend on whether or not he can liquidate some of the assets faster, as he said last week he was in the process of.
Bhasin thinks the coming Union Budget could be a gamechanger for the group, if it helps correct the short-term liquidity displacement of the NBFC sector.