(UTV|BUZZ REPORT) –
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As oil prices collapsed alongside global stocks amid mounting coronavirus fears, billions of dollars were erased from Ambani’s net worth
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While the outbreak has curtailed some of Alibaba’s businesses, demand for its cloud computing services and mobile apps has increased
Indian energy tycoon Mukesh Ambani is no longer Asia’s richest man, relinquishing the title to Jack Ma after oil prices collapsed along with global stocks.
The rout, exacerbated by mounting fears that the spread of the novel coronavirus will thrust the world into a recession, erased US$5.8 billion from Ambani’s net worth on Monday and dropped him to No. 2 on the list of Asia’s richest people, according to the Bloomberg Billionaires Index.
Ma, the founder of Alibaba Group Holding – which owns the South China Morning Post – relinquished the No. 1 ranking in mid-2018, but is back on top with a US$44.5 billion fortune, about US$2.6 billion more than Ambani.
Oil plunged the most in 29 years as Saudi Arabia and Russia vowed to pump more in a struggle for market share just as the coronavirus is spurring the first decline in demand in more than a decade. That raises questions about whether Ambani’s flagship Reliance Industries will be able to cut net debt to zero by early 2021, as he has pledged. The plan hinges on a proposal to sell a stake in the group’s oil and petrochemicals division to Saudi Arabian Oil Company, the world’s biggest producer.
While the coronavirus has curtailed some of Alibaba’s businesses, the damage has been mitigated by increased demand for its cloud computing services and mobile apps.
Reliance Industries, by comparison, has no such silver lining. The Indian company’s shares plunged 12 per cent on Monday, the most since 2009, extending this year’s decline to 26 per cent. Alibaba’s American depositary receipts have slipped 6.8 per cent so far in 2020.
Few of the world’s billionaires fared well in Monday’s collapse as the S&P 500 and Dow Jones Industrial Average each plunged more than 7.5 per cent, the most since the 2008 financial crisis, threatening to end the longest bull market in history. But no one did worse than those whose fortunes are underpinned by oil. Wildcatter Harold Hamm’s fortune was cut almost in half to US$2.4 billion and fellow oil magnate Jeff Hildebrand lost US$3 billion, bumping both from Bloomberg’s 500-member wealth ranking.
In its pivot towards new businesses such as telecommunications, technology and retail, Reliance Industries piled on billions of dollars of debt over the years.
It spent almost US$50 billion – most of it funded by borrowings – to build Reliance Jio Infocomm, which became India’s No. 1 wireless carrier within about three years of its debut. As the mobile venture took off, Ambani also unveiled plans for an e-commerce empire to rival Amazon in India.
Addressing concerns over the liabilities, Ambani pledged in August to cut the group’s net debt to zero from about US$21 billion as of last March. The Aramco deal is crucial to that plan for which Reliance Industries has valued its oil-to-chemicals division at US$75 billion including debt, implying a US$15 billion valuation for the 20 per cent stake that is for sale.
Signs of a potential delay to that deal unnerved some investors, hammering the stock since it touched a record high on December 19.
Reliance Industries expected the Aramco transaction to be completed by March, but people familiar with the matter said in February that talks were still ongoing to bridge differences between the two parties over the deal’s structure.
Adding to the uncertainty, Prime Minister Narendra Modi’s administration has petitioned a court to halt the proposed stake sale, threatening a key source of funds needed to pare net debt.
Ambani, 62, could soon bounce back from the setback, said Harish H.V., managing partner at ECube Investment Advisors in Bangalore.
“The game isn’t over,” he said. “Ambani has successfully built a robust business model which would keep him in the game. Moreover, his telecom business will start yielding results in coming years.”