Write Comment     |     E-Mail To a Friend     |     Facebook     |     Twitter     |     Print

Mukesh Ambani moves past Li Ka-shing to become second-richest man in Asia

Mukesh Ambani, chairman of Reliance Industries Ltd, has added $12.1 billion to his wealth this year, according to the Bloomberg Billionaires Index, as shares of his refining-to-telecom company surged to a record.

Mukesh Ambani has elbowed past Li Ka-shing to become Asia’s second-richest man as investors rallied behind his efforts to arm India’s poor with cheap data-loaded phones. Some analysts are beginning to focus on the costs of his ambition.

The chairman of Reliance Industries Ltd. has added $12.1 billion to his wealth this year, according to the Bloomberg Billionaires Index, as shares of his refining-to-telecom company surged to a record. Spurring the rally on is optimism that a new $23 phone launched last month will expand the market for Ambani’s fourth-generation mobile network into India’s hinterland. The whistles and applause that greeted the JioPhone obscured the fact that by one measure the company’s debt has climbed to at least a 15-year high.

The telecom business, Ambani’s seven-year labor of love, has sucked in more than $31 billion in investments and is yet to earn him and his shareholders any profits. It’s contributed to a near tripling of the group’s total debt since March 2012 and sparked a vicious price war in the world’s second-largest mobile-phone market. About 90 percent of Reliance’s revenues continue to come from its legacy refining and petrochemicals units, with retail, media and energy exploration contributing the rest.

Local brokerage Kotak Securities Ltd. sounded a warning on July 23 when it downgraded Reliance’s stock to reduce. “We remain wary of high capex run-rate and rising net debt levels,” wrote Mumbai-based analysts Tarun Lakhotia and Akshay Bhor.

The company’s net debt-to-EBITDA ratio has quadrupled in the five years to March 2017 and is at the highest level since 2002, when Bloomberg began tracking the data. Analysts consider EBITDA a gauge of a company’s operating profit, or the money it makes before paying taxes, interest on loans and accounting for depreciation and amortization.

A Reliance spokesman didn’t respond to an email seeking comment about the company’s growing debt.

Ambani described Jio as “a jewel” among Reliance assets during the company’s annual general meeting on July 21. “Its business and societal value will grow immensely over the next decade,” he said. “Jio will become India’s largest provider of data service, products and application platforms.”

To be sure, Kotak Securities is among a minority of four brokerages with a sell rating on Reliance, compared with 13 hold and 21 buy recommendations among firms Bloomberg tracks. The company’s shares have climbed 49 percent this year to close at 1,615.20 rupees in Mumbai on Monday, compared with a 12-month target of 1,619.20 rupees.