Crashing the party

It’s clearly the dark horse in the stable of Mukesh Ambani’s Reliance group. When Mukesh and Anil Ambani arrived at a settlement to carve out the family’s assets two years ago, one company not on the radar was Reliance Industrial Infrastructure Ltd (RIIL).

It is now, at least on the radar of a section of investors, who have bumped the stock upwards from Rs 357 to Rs 2,163 per share in the past seven months.

If you consider the price of RIIL at the time of settlement, of Rs 138, the share has given a massive return of over 1,500 per cent in the past 28 months.

So what’s making RIIL, a company engaged in construction and leasing of infrastructure, tick? Says Pankaj Namdharani, Assistant Vice President, SPA Securities:

“There are expectations of bulk orders from the parent for building gas pipelines from the KG Basin.” Others speculate that RIIL is best suited to build logistics for the group’s retail venture.

But there are also some unanswered questions that are on analysts’ minds. First and foremost is why is the smart institutional money—of mutual funds and foreign institutional investors—shying away from the RIIL counter.

Institutional investors currently hold a negligible 2 per cent in the company as on June’07.

A surprise investor is Anil Ambani’s Reliance Capital, which has a little over 1 per cent in the company. Three unknown entities hold a little over 10 per cent in the company.

The current financials of the company too don’t do justice to the skyrocketing price. Total income fell marginally to Rs 73 crore in 2006-07; net profit was at Rs 19 crore.

But if RIIL does get the billion dollar orders from the parent that the market is betting on, investors will be in for a pleasant surprise.