Reliance Shares Soar After Ambanis Seek ‘Harmony’

Reliance Power Chairman Anil Ambani
Reliance Power Chairman Anil Ambani walks through a group of reporters outside the India Supreme Court in New Delhi. Photographer: Pankaj Nangia/Bloomberg

Mukesh Ambani’s Reliance Industries Ltd. and companies controlled by Anil Ambani surged in Mumbai, adding $4 billion in market value, after the brothers moved to end a five-year feud that split India’s second-biggest group.

Reliance Industries, operator of the world’s largest refinery, gained as much as 5.4 percent, Reliance Infrastructure Ltd. rose 12 percent and Reliance Communications Ltd. advanced 13 percent, the three biggest gainers on the Sensitive Index.

Mukesh, 53, and 50-year-old Anil issued almost identical statements yesterday, saying they were “hopeful and confident” of creating an “environment of harmony, co-operation and collaboration” after ending a 2006 accord to not compete.

The agreement frees up the world’s richest brothers to invest in sectors including finance, telecoms and energy and support India’s target of spending $1.5 trillion over the next decade building infrastructure. The spat held up road projects in Mumbai, a power station intended to curb blackouts in New Delhi and a merger with Africa’s biggest mobile-phone company.

“The two groups now get the opportunity to invest in many more businesses which were closed to them before,” P. Phani Sekhar, who manages funds for wealthy individuals at Angel Broking Ltd., said by telephone from Mumbai. “Overall, the announcements are directionally positive because of the firm steps being taken toward a final truce.”

Today’s rally extended gains in the Reliance group companies that have more than tripled since the feuding brothers broke up the family enterprise. The six publically traded companies had a market value of $96 billion today, compared with $29 billion on Jan. 17, 2006, the day before the spilt.

Supreme Court

The rapprochement comes 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.

The boards of both groups agreed to scrap the 2006 non-compete agreements and negotiations will “eliminate any room for further disputes,” they said in statements yesterday. The groups 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.

“They can now focus on business rather than court battles,” Jagannadham Thunuguntla, head of equity at SMC Capitals Ltd. in New Delhi, said by telephone. “The court order signaled the end-game was near and this agreement is a step in that direction.”

Shares Surge

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

Fiercest Fight

Under the 2005 agreement to split the Reliance group, Mukesh kept the petrochemicals, oil and gas units along with the flagship company, Reliance Industries. Anil got newer businesses such as power, telecommunications, financial services and entertainment. Both retained rights to the Reliance name.

In October 2007, Anil’s side of the business complained to the Indian capital markets regulator that Reliance Industries was trying to stall Reliance Power’s initial public offering.

Their fiercest fight was over India’s largest find of natural gas.

India’s 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 asset in the Bay of Bengal 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.

The companies “will expeditiously negotiate gas supply arrangements, as per Supreme Court order, and hope to conclude negotiations very soon,” Anil Ambani’s group said yesterday.

Reliance Industries had a market value of $71.2 billion at the end of today’s trading. Reliance Infrastructure was valued at $5 billion, Reliance Power at $7.6 billion, Reliance Communications at $6.5 billion, Reliance Natural Resources at $1.9 billion and Reliance Capital Ltd. at $3.5 billion, valuing the five Anil Ambani group companies at $24.5 billion.

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