Reliance Industries announces oil discovery

Reliance Industries announces it has discovered oil in its exploration block and emphasizes focus on retailing at company's annual general meeting on June 27.
Reliance Industries (ôRILö) Chairman Mukesh Ambani told shareholders at the companyÆs 32nd annual general meeting ("AGM") on June 27 that it had discovered oil in its exploration block in the Krishna Godavari basin off the east coast of India. Mukesh Ambani did not share details regarding size of the find commenting that the potential of the oil block was yet to be assessed but did say that ômore than the size the discovery signifies a large geological play that could result in future discoveries". The company has tested in two zones located 3 kilometres below the sea. At the same meeting Mukesh Ambani also announced a decision to expand the companyÆs polyester portfolio from textiles to packaging, paper and construction industries.

Retailing is also very much on the anvil in the future with a $5.6 billion investment proposed in the sector. A few days ago Mukesh Ambani said organized retail would be the ônext big ideaö for Reliance and at the AGM he commented ôorganised retail will have a profound impact and it will be a pathbreaking initiative to touch the lives of rural people, who are yet to be touched by the economic development that the country is witnessing.ö Reliance has been hiring professionals from multinationals in the fast moving consumer goods industry to spearhead this foray û Unilever India veteran Gurinder Kapoor joined recently and heads are also being hunted elsewhere in the industry e.g. RPG, Coca Cola India. The stock marketÆs confidence in the ability of RIL to convert its vision into reality was visible in the reaction of investors to the companyÆs announcements regarding its retail sector plans. Pantaloon Retail (India's biggest retailer) fell 6%, Piramyd Retail lost 5% and Shopper's Stop also lost initially though it recovered in later trading.

Meanwhile there seems to be a new instalment of Ambani versus Ambani, the feud between brothers Mukesh and Anil all set for airing. On Saturday Anil Ambani objected to Mukesh AmbaniÆs plans to build an airport and a power plant in the special economic zone (SEZ) Mukesh controls in the state of Haryana citing terms of the non-compete the brothers executed a year ago. Anil Ambani claimed that both airports and power were earmarked for the Anil Dhirubhai Ambani Group. The RIL response was that both the power plant and the airport were incidental to the core business of setting up the SEZ hence not in violation of the non-compete.

This time around investors seem unruffled by the tension brewing between the brothers. Earlier, in 2004-05 after the feud became public and eventually quite acrimonious all Reliance group shares had taken a beating on the bourses as investors displayed nervousness regarding how things would play out. This time investors seem more pragmatic taking the attitude that the issue will be sorted out without adversely impacting the future of the companies involved. Reliance, which has the heaviest weight in the Sensex, the benchmark BSE index, went up 3% in advance of the AGM in anticipation of some positive announcements from the company, closing firm at Rs986 ($21.8), while the Sensex closed up just half a percent trading mostly sideways between 10,000 and 10,100 levels.
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