Reliance sab ka baap

Mumbai (IBTimes.com) - India's most influential business tycoon, one who thinks bigger than the rest, one who "hopes to kick the country's nascent boom into hyperdrive by remaking its stores, farms and even its biggest cities" – is how Newsweek has described $ 35 billion market-cap Reliance Industries Limited (RIL) chairman, Mukesh Ambani, devoting a full length cover story on him.

According to Newsweek, Ambani was all that even before a bitter internal feud led to a split in his family conglomerate. The breakup left him in control of the larger share, Reliance Industries Ltd., and that behemoth has seen its fortunes soar ever since.

Calling him "India's Mr. Big," the cover story written by the magazine's Southeast Asia Correspondent Ron Moreau and Special Correspondent Sudip Mazumdar, said that Mukesh, 49, has finalized plans to invest more than $ 11 billion over the next decade to build two new satellite cities outside Mumbai and Delhi.

The new cities refer to the two Special Economic Zones (SEZs) that Reliance is setting up next to Mumbai and Delhi, complete with all infrastructures. In fact, the Mumbai one will come with a new seaport as well. When ready in 2010, Ambani expects each city to pump $ 25 billion dollars into the national economy.

Ambani plans to also invest $ 5 billion by 2011 to put both farms and stores on the road to modernity, connect them through a distribution system guided by the latest logistics technology and create enough of a surplus to generate $ 20 billion in agricultural exports annually.

If his plan succeeds, the magazine said, consumers will get fresher food at lower prices, rural incomes will soar, farmers will become active consumers and Reliance will become "a Wal Mart in India."

What distinguishes Ambani is the sweep of his plans and a track record for making big projects happen, the story said.

According to Newsweek, Ambani harbors plans to build a chain of both small and supersize stores across 1500 towns and cities in India, creating one million jobs and reaching $ 25 billion in annual sales, all by 2011. "This will make us the largest private-sector employer in India," he told the magazine.

"We are also creating something that is totally missing in India: an efficient distribution system linked to supermarkets across the world," he said.

According to analysts, India's booming retail market, estimated at about $ 200 billion (euro 160 billion), is growing at about 30 percent per annum and is largely dominated by more than 15 million small and inefficient family-run retail stores across the nation with large organized stores remaining a rarity.

Rising middle class incomes and an increase in demand for branded products are driving the growth of retail business in India.

Nevertheless, organized retailing, selling through company-owned network stores, currently totals about $ 8 billion or less than 5 percent of trade in the country.

However, according to AT Kearney, revenues from organized retail are expected to triple to about $ 24 billion by 2010, a reason good enough for U.S.-based Wal-Mart Stores Inc., Germany's Metro AG, France's Carrefour and UK's Tesco Inc. to come knocking on India's doors despite the burgeoning competition in the domestic industry.

Nevertheless, the government has so far allowed 51 percent foreign direct investment (FDI) in retailing by companies which sell only a single brand like Reebok and Nokia.

According to Newsweek, Ambani's farm-to-retail team is researching every step of the plan, from vegetable growing to hypermarket versus mom-and-pop retailing. The good news is that the backwardness of Indian farming conceals competitive advantages - for example, India has more arable land than any other country, and spans climate zones ranging from alpine to tropical that can grow any cash crop.

The bad news, says Ambani, is that "the whole supply chain is totally disorganized." Because of a lack of storage, refrigeration and transportation, some 40 percent of India's fruit and vegetables spoil before reaching the market.

To transform Indian farmers into quality suppliers for his new retail chain, Ambani plans to create 1,600 farm-supply hubs across India, providing technical know-how and credit, selling seeds, fertilizer and fuel, and buying produce. He also plans to build some 85 logistics centres to move food to retail outlets and to ports and airports for export.

Reliance is gearing up to train tens of thousands of new employees in the next six to eight months to do everything from erecting prefab warehouses to transporting fresh produce, the Newsweek article said.

In the interview with Newsweek, Ambani did not hesitate to say, "We are rebalancing the world," giving details about his ambitious multi-billion agri-retail plan. "We are in fact lucky to be at the right place at the right time, contributing to our self-confidence as Indians. That's what energizes me," he added.

"There will be mistakes. But we are not scared. We will correct our mistakes fast and move on," he said.

Ambani has also forecast that consumer sales will surpass refining as Reliance's main source of revenue within seven years. On the other big project focusing on alternative energy, the Newsweek article documented Reliance's experiments in Cellulose and Jatropha.

Ambani, who has also given the go-ahead signal for building world's largest oil refinery in Jamnagar, Gujarat, for $ 6 billion, says to the magazine, "If you can crack the Cellulose code just like the Da Vinci Code, Cellulose and Jatropha could give us two agro-routes- a world without gasoline."

Reliance now has teams setting up experimental biomass generators in remote villages and envisions a day when thousands of villages will have these generators - sold and serviced by Reliance's rural retail network.

Speaking about the fued with his younger brother, Ambani says, "Fundamentally we had different approaches. My view is to give everyone the space to grow in his own way. When you see restructuring or separations in a family [firm], value has almost always been destroyed. This is the first case where value has been enhanced. In that way it has been a win-win ending."

What distinguishes Mukesh Ambani from others? "His genius, his strength, is that he’s enormously good at executing large projects," Newsweek quoted Nandan Nilekani, chief executive of India's leading IT company, Infosys, as saying. "He is able to assemble large numbers of people, the project-management skills, the capital and then execute."

"If anyone can do it, Reliance can," added Sanjay Nayar, chief executive, Citigroup India.

Touche.

Excerpts from the interview:

Newsweek: You say India's competitive advantages are globalization, democracy, the ability to adapt to technology, and demography. Starting with democracy, doesn't it slow growth?

Sure, but increased aspirations are also driving growth. Politicians used to tell me: "We sell dreams to people that we knew we'd never be able to fulfill." Today, the mind-set of these politicians has changed. They genuinely believe we have an opportunity to substantially alleviate poverty by 2030.

How does technology fit in?

We are using new technologies in meaningful ways. To build our new refinery in 60 percent of the time it took to build our first, we are training 20,000 people in a new generation of welding technology in six months. This is where demographics comes in. We have 650 million people who are below their early 30s, while the U.S. and Europe face a shortage of skilled workers. A billion people used to mean lots of problems. Today I see a billion people as a billion potential consumers, an opportunity to generate value for them and to make a return for myself.

How do you motivate poor farmers to join your new farm-to-retail network?

We will work with farmers to get them to increase their productivity and produce the right products of the right quality. This also requires a major investment in technology because there are minimum import standards [overseas]. We are also creating something that is totally missing in India: an efficient distribution system, linked to supermarkets across the world. This will generate up to 1 million new jobs and make us the largest private- sector employer in India.

What drives you?

In my father's language: "To create something out of nothing." That possibility exists in India even in old-world sectors like agriculture.

Is this an agrarian revolution?

Absolutely. Reliance is involving itself in agriculture in a big way. This will help to create a second green revolution at a time when energy and agro are converging. Oil is now at $ 70 a barrel, [but it's] a finite asset. We need a fallback position. We are looking for more gas and oil but we are also trying to grow our own energy. We think this has the potential to change the world.