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Reliance overtakes Exxon to become world’s second largest energy company

Reliance overtakes Exxon

Reliance on the 24th of July overtook ExxonMobil to become the second-largest energy company in the world. The conglomerate is now ranked 46th on market cap, according to stock market data.

The share price on Friday, 24th of July, rose to a record high of Rs. 2,163. The price ended up settling to Rs. 2146.20 at the closing bell. The market cap got up to a record height of Rs. 14 lakh crore that in turn took the company to 46th position.

54,262 crore m-cap of partly paid shares generated by the recent rights issue, along with the already existing Rs. 13.6 lakh crore m-cap took the industry past its rival ExxonMobil. This takes the combined market value of RIL at Rs. 14.1 lakh crore or 189.3 billion dollars. ExxonMobil has a current market cap of 184.7 billion dollars standing third in the race.

The oil-to-telecom conglomerate has put behind not only ExxonMobil, but also some highly valued companies like Chevron (which has m-cap of 169 billion dollars), Oracle, Unilever, Bank of China, BHP Group, Royal Dutch Shell, and SoftBank group. Reliance also conquered the feat of becoming the first Indian company of crossing market cap of Rs. 14 lakh crore.

With the global pandemic, the oil demand has gone down steeply. This in April led the companies into a second-quarter collapse from which they recently recovered. The sudden and major rise in oil prices combined with production cuts and millions of unsold barrels has hit the oil companies like ExxonMobil hard.

Global standings:

Globally Saudi Aramco leads in the race and is the largest energy company. It boasts a market cap of 1.75 trillion dollars. It is also the largest company in terms of m-cap. Closely followed by Apple (1.6 trillion dollars), Microsoft (1.5 trillion dollars), Amazon (1.48 trillion dollars), and Alphabet (1.03 trillion dollars).

There is a huge gap between the first and the second company in the energy industry with Reliance being far behind Saudi Aramco, with a market cap of 189.3 billion dollars.

Asia standings:

In Asia, the company stands in 10th place in terms of market cap. In Asia, only 12 companies crossed the market cap of USD 150 billion. Although most of these companies are of Chinese background, Reliance is the only Indian company that makes the list.

On June 22nd, the counter doubled the investors’ wealth since hitting low on March 23rd when the share price touched bottom at Rs. 867. Then the total market cap of the company stood at Rs. 5.5 lakh crore or 73.5 billion dollars. The list here is also led by the Saudi Arabian Oil Company followed by Tencent Holdings, Samsung, Taiwan Semiconductor Manufacturing Co., Etc..

Reli8ance-exxon graph of net worth by bloomberg
Reliance-Exxon graph showing  net worth

Reliance partly paid-up shares generated (after the conclusion of the Rights Issue) 4. 1x returns to investors in less than two months. This issue closed on June 4, 2020, when the investors needed to pay Rs. 314.25 to own each of the partly (25%) paid-up shares (of which Rs 2.50 was towards the face value of rights equity shares and Rs 311.75 towards the premium amount of rights equity shares). The remaining 75% is to be paid in the next fiscal.

In just 42 days the rights issue reached from announcement to allotment, although this was during the COVID-19 pandemic which affected the market. This has been also India’s largest-ever rights issue of Rs. 53,124 crore. Along with this, RIL’s rights issue also set a record of being the largest rights issue by a non-financial company in the last ten years.

Mukesh Ambani, Asia and India’s richest man, leads Reliance Industries Limited. With a net worth of 8,120 crore USD, Mukesh Ambani holds the position of the Forbes list as fifth richest man globally.

RIL through the years:

Dhirubhai Ambani and his sons
Dhirubhai Ambani and his sons

Dhirubhai Ambani took reliance to become one of the most important companies in the world.  Everyone expected his sons to join the businesses in their mid-20s. We can divide India’s richest sibling rivalry into five parts:

  • Death of Dhirubhai Ambani:

In July 2002, the then head of RIL Dhirubhai Ambani passed away after suffering a massive stroke. As he did not leave behind any will the two Ambani brothers got into a power struggle. For a time being Mukesh, the elder brother became the chairman of RIL. His brother Anil Ambani took the position of vice-chairman of the company.

  • Start of dispute:

The feud between the brothers started with a report that brought Mukesh’s conspiracy, to expel his younger brother from the board, into the light. The feud became public in 2004. The Ambanis then had a 46.67 % stake in the company, the public 14.38 and foreign institutional investors had 22.85%.

 

  • Mother intervenes:

Their mother, Kokilaben Ambani, settled the rift between the brothers as she arranged for a de-merger. With Bombay High Court accepting the de-merger, Mukesh Ambani got Reliance Industries and IPCL, while his brother got Reliance Infocomm, Reliance Energy, and Reliance Capital.

Mukesh got the profitable but slow-growing industries whereas his brother, Anil Ambani got the telecom, power generation, and financial services which had the potential to grow. Initially, the younger brother was predicted to have the upper hand as the telecom industry was expected to rise in the next decade.

  • Cold War of Brothers:

Anil’s net worth was summed up to be 45 billion dollars only four billion dollars less than his elder sibling. He went on to invest in Steven Spielberg’s DreamWorks Picture and was seen accompanied by the “fast” groups in Mumbai.

In 2006, Anil Ambani challenged a gas contract signed by Mukesh’s company. Then in 2008, he accused the Petroleum Minister to have secret dealings with his brother’s company. He also filed a defamation case of 2.12 billion dollars against his brother.

Over the next few years, the civil war between the brothers only grew bigger. At a point, it reached such heights that the brothers were not even in speaking terms.

Cut to a few years, Anil Ambani’s businesses begin to struggle. With old telecom business becoming obsolete and his brother joining the industry with a bang, Anil Ambani’s future got uncertain pretty quickly. Even his power projects failed due to government-mandated lower electricity rates.

  • Jio, the final blow:

In 2016, the elder brother unveiled Reliance Jio, a 4G network service with lower data rates. Promoting the company Mukesh Ambani commented that the Mobile industry will become the single most defining industries of the country. The company’s venture was an overnight success. Infotel Broadband Services bought Jio’s wireless spectrum initially. Jio bought it back hours afterward with its rapid success.

With the success, Mukesh Ambani went on not just to compete, but also to dominate the wireless industry in India. With new projects and investments, he now plans to be the first company to bring 5G in India.

The free promotion that the company did at the start of its ventures was followed by a price war with his brother’s already falling Reliance Communications. In 2019, Reliance Communications filed for bankruptcy.

Since then Anil Ambani has lost numerous court cases and has come under harsh criticism. In 2020, the younger sibling, let out a statement saying his net worth is now zero.

With the demise of his younger brother’s business empire, the elder brother’s success heightened. Success in multiple ventures saw his net worth reach to new heights. The Forbes fifth richest man, making the profits in the telecom and wireless departments, now has collaborations with Google and Facebook. Expanding the digital and retail section of the conglomerate has attracted 20 billion dollars into the Jio platform. This also added 22.3 billion dollars to Ambani’s wealth this year. The graph of India’s richest man only goes upwards for now.

 

 

 

 

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