Friday, June 10, 2011

RIL enters Insurance business

Bharti group today exited from its financial services joint ventures with French firm AXA and sold its entire 74% stake in both general and life insurance businesses to Mukesh Ambani-led Reliance Industries (RIL) for an undisclosed amount.

RIL and its subsidiary Reliance Industrial Infrastructure (RIIL) would effectively own respectively 57% and 17% in both the insurance companies and would become AXA's JV partners in India. AXA would retain its current 26% shareholding and would continue to manage the day to day operations of both JVs.

This is RIL's third diversification after hotels and broadband businesses. RIL is sitting on huge cash reserves and is targeting to become a debt free company by 2012. Lack enough investment opportunities available in refining and petrochemical sector, RIL is diversifying into other lines of businesses. Now it is to be seen how Mukesh Amabani bring these business up and create shareholders wealth out of these diversification.
But currently the shareholders doesn't seem to be happy with all these diworsification (sorry diversification) and the stock has been a serious under performer since past 2 years. The stock closed down more than 1% in today's trade.

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