Aug. 30 (Bloomberg) -- Billionaire Mukesh Ambani’s Reliance Industries Ltd. acquired a stake in India’s luxury Oberoi hotel chain, his seventh investment this year as he diversifies from the oil and gas sector that made him Asia’s richest man.
Reliance Industries, operator of the world’s biggest refinery complex, agreed to pay 10.2 billion rupees ($217 million) for a stake in EIH Ltd., which runs the Oberoi and Trident hotels, according to a statement today.
Ambani, 53, has invested more than $1.2 billion buying into a broadband company, cargo carrier and announced plans to build hospitals, universities and set up a sports marketing company. The fastest pace of economic growth in 2 1/2 years is bolstering demand for services, providing alternative sources of revenue as Reliance’s core energy business slows.
“The push is to get into services and diversify their revenue sources from being a pure manufacturing company,” said Jagannadham Thunuguntla, chief strategist at SMC Capitals Ltd. in New Delhi. “Telecom and hospitality are a reflection of India’s growth story.”
Reliance Industries stock has declined 13 percent this year as natural gas production from the nation’s biggest field has been capped for at least two years and earnings from turning crude into fuels at its refining complex has slowed. Ambani faces increased competition from billionaire Anil Agarwal, who this month agreed to buy a controlling stake in India’s largest onland oil field.
‘Excellent Prospects’
“EIH has excellent future prospects,” Reliance said in a statement today. Manoj Warrier, a spokesman for Reliance, declined to comment further.
Reliance Industries shares which have the highest weight in the index, declined 0.2 percent to 947.95 rupees at the end of trading in Mumbai, falling for the sixth straight day. EIH shares gained 11.5 percent to 150.90 rupees, the highest in almost two years.
Reliance is close to signing an agreement with DE Shaw & Co. to start an $800 million infrastructure fund, the Economic Times reported Aug. 26, without saying where it got the information. Chairman Ambani told shareholders June 18 Reliance Foundation will build a university and a hospital in Mumbai.
The company, which also produces chemicals, expects its retail business revenue to grow 10-fold in five years to 450 billion rupees ($9.6 billion). Reliance Retail, with 1,150 stores in 86 cities, had sales of more than 45 billion rupees in the year to March 31, Ambani told shareholders June 18.
“There are opportunities to grow in telecoms and hospitality but I would like to see them fully concentrate on manufacturing,” said Juergen Maier, who helps manage $1.3 billion of emerging market stocks, including Reliance. “Their attempt at service in the retail sector hasn’t been very successful. I’m not very happy that they are diversifying into services.”
Peak Output
Reliance Industries expects to reach peak output at the KG- D6 field in the Bay of Bengal as late as 2012 at least two years behind schedule, two people with knowledge of the plan said July 27. The explorer is currently producing about 60 million cubic meters a day of the clean-burning fuel, 25 percent below its capacity.
The company is also spending almost $3.4 billion to buy shale gas assets in the U.S. from three companies, including Atlas Energy Inc. and Pioneer Natural Resources Co.
Reliance Industries operates 1.24 million barrels a day of crude oil refining capacity in the west Indian state of Gujarat. Global refining margins, or earnings from processing oil into fuels, shrank to $4.22 a barrel in the quarter, compared with $5.49 a barrel in the three months ended June 30, according to data compiled by BP Plc.
Gains from processing oil into fuels may remain stable in the next three quarters, Chief Financial Officer Alok Agarwal said July 27.
Slower refining profit have resulted in Reliance Industries’ net income missing analysts’ estimates in at least three of the last five quarters.
