Mukesh to detail growth plans to RIL shareholders Friday

The cash-rich company has its options open to enter telecom, power and finance sectors that were hitherto no-go areas as spelt out in a separation agreement between the two Ambani brothers

Within days of a truce with younger brother Anil, Asia's richest man Mukesh Ambani will address shareholders of Reliance Industries (RIL) tomorrow and is expected to announce mega investment plans, possibly in power and telecom sectors, reports PTI.

The cash-rich company has its options open to enter telecom, power and finance sectors that were hitherto no-go areas as spelt out in a separation agreement between the two brothers on 18 June 2005.

But, the non-compete pact was scrapped last month as part of a truce reached shortly after the Supreme Court verdict denying cheap gas to Anil Ambani-led Reliance Natural Resources (RNRL) from Mukesh-run RIL on the basis of a family agreement.

The bonhomie has also led to speculation that RIL may pick minority equity in three companies, including Reliance Communications (RCom), led by Anil and that younger Ambani, along with his wife Tina and mother Kokilaben, would attend the RIL annual general meeting (AGM) tomorrow.

Mukesh, 53, may use his address to RIL shareholders at Mumbai's Birla Matoshree auditorium, the first after the Supreme Court judgment on the bitter gas dispute, to spell out how the $2-$3 billion of surplus cash the company is generating every year will be put to use.

Friday also marks five years to the day since matriarch Kokilaben Ambani brought about a family settlement, dividing the Reliance group empire between the two brothers.

What is keenly watched is whether Mukesh will make any comments on the dispute over pricing and supply of gas from RIL's KG-D6 fields to Anil Ambani Group's power plants.

Mukesh has so far not made any comments during the four- year long gas dispute. RIL's statement issued after the Supreme Court judgment too did not have any comment from Mukesh on the row.

He may, however, not say much on RIL entering into a new gas sales and purchase agreement with Anil's RNRL as had been ordered by the apex court.

Under the 2005 agreement that split the Reliance empire created by Dhirubhai Ambani, Mukesh, kept the petrochemicals, oil and gas units and Anil, 51, got the power, financial services, telecommunications, and entertainment units.

The two, last month, scrapped the accord drawn up the following year that barred them from expanding into each other's businesses.

Mukesh is likely to talk about the oil refiner and energy explorer's entry into telecom through the acquisition of an Internet service company for over $1 billion. He may also indicate the company's willingness to enter commercial power generation by bidding for the government's planned ultra mega power projects in Orissa and Chhattisgarh.

Besides diversification plans, the AGM may spell out RIL's overseas ambitions. After a failed bid to buy bankrupt chemical maker LyondellBasell Industries AF for $14.5 billion and losing out on a bid for Canadian firm Value Creations, RIL in April acquired 40% stake in shale gas assets of Atlas Energy Inc in US.

The operator of the world's biggest refining complex and India's largest natural gas field had cash and equivalent of Rs21,870 crore and outstanding debt of about Rs62,500 crore as on 31 March 2010.


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Consumers want global perspective but local expertise; women to continue to dominate spending

There are over 4 billion consumers worldwide yet to be served. However, to tap the growing opportunity, marketers need a nuanced understanding of local consumers, say researchers

The centre of gravity, especially from the consumer perspective, is shifting away from North America and Europe. In the decades to come, emerging economies will deliver more growth- and more profits, said the Nielsen Company.

Nielsen's Hany Mwafy, managing director for North Africa and James Russo, vice president for global consumer insights, in a presentation said that by 2030, the developing world's middle class will be larger than the total populations of Europe, Japan and the United States combined.

Nielsen said between 2008 and 2014, Brazil, Russia, India and China (the BRIC nations) are expected to grow 61.3%, compared to only 12.8% growth in the G7 nations-the US, UK, France, Italy, Germany, Canada and Japan.

Back home, the same trend can be seen when we compare mid and small towns with metros. Financial inclusion, improved agriculture markets, industrialisation and media & telecom penetration have meant that satellite and other towns now exceed the overall market size and growth compared to the top six metros in the country.

"Assuming growth differentials of 2% at current levels, these markets, on a combined basis, would be 25% higher versus the top six metro towns," said Ambit Capital Pvt Ltd in a research note.

Led by media, the choice expansion that can be seen in several categories has been substantial. At present, global marketers' combined share of turnover from India is less than 1% compared to 3% contribution to global consumption by India. Nearly two-thirds of the top 100 global marketers are already present in the country and are expected to increase their investments to drive further expansion.

In India, education, social empowerment and rise of the services sector have supported improvement of the status of women significantly. Women are expected to influence more than two-thirds of consumption expenditure in India.

Some areas that are likely to see significant growth because of their changed social and economic status are apparel, food and grocery, consumer electronics and a host of products and services addressing health, beauty and fitness.

As more women enter the workforce, their earning power increases, as does their power within their households. Women now control almost $12 trillion of the $18 trillion in global consumer spending, the Nielsen presentation pointed out.

Mobile phones are proliferating in the developing world, bringing Internet access to consumers who have never had a PC or been online. In line with PC usage growth of about 21%, Internet usage in India has also seen significant increase by about 31% and currently stands at an estimated base of 75 million users in urban markets. The usage is not restricted to merely metros but has spread to remote corners with the smaller towns accounting for higher numbers.

Speaking about the proliferation of the Internet, Ambit Capital said, "In our opinion, the reach of the Internet will have significant influence on consumption of services sectors such as education, music, travel, gaming, news and banking over the next decade. With improved bandwidths we expect that rural India will increasingly become extensive users of this service."

Women along with the youth (aged between 10 years to 25 years) will continue to grab the focus of all marketers. Influence of both these categories is also borne out by the media spend in television and the press, where it is estimated that collectively more than 50% of the spend is exclusively targeted at these segments.

According to a FICCI-KPMG report on media and entertainment, during 2009, advertisements related to food & beverages with an 11% share dominated the small screen while education with a 15% share ruled print ad-spend.

In 2009, average daily TV viewing worldwide was a record 192 minutes. This type of TV viewership can support growing acceptance of multinational brands, said Nielsen.

However, TV viewership in India is divided into about 395 channels. Unlike other markets, the Indian market is significantly heterogeneous which is best epitomised by the fact that there are nearly 122 languages and 234 mother tongues with minimum speaker strength of 10,000, as per the census of 2001. These trends of heterogeneity are expected to continue to drive importance of customisation and reach, as opposed to just superior product and attractive pricing in several markets.

"In our opinion, therefore, not just superior products but supply chains and distribution reach will be extremely critical from the growth perspective. Organisations with robust supply chains and distribution reach in our opinion can enjoy growth rates almost 50% higher the normal growth rates," said Ambit Capital.

Nielsen said that there are over 4 billion consumers worldwide yet to be served, however, to tap these growing opportunities, marketers need a nuanced understanding of local consumers. According to Nielsen, the key lessons for marketers would be to listen and learn, set expectations, not to overreact to political and economic changes and be flexible.

While setting expectations, Nielsen advised global marketers not to assume that they will be able to easily take a leadership position, as there may be strong competition. Citing the example of Coca-Cola, which took 20 years to achieve parity with Pepsi in Egypt, Nielsen said marketers need a global perspective but local expertise. Over time, emerging market innovations will spur change in mature markets, it said.

"Marketers need to be able to tolerate both risk and complexity, and take a long-term view given the uncertain political climate in so many of these countries. For those willing to take the challenge on, the rewards can be enormous," Nielsen added.


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