Reliance Industries Ltd in....what to do??? management is in doubt...

Unlike others in the oil business,RIL the india largest private company isn’t running short of cash. The company is facing the issue how to use the cash to diversify the business and maintain growth in future.

In the last one year, RIL doubled refining capacities and added one of the world’s largest gas facilities.RIL worked three years to simultaneously implement two of India’s largest and most complex hydrocarbon projects the 580,000 bpd second refinery at Jamnagar and gas production from the company’s deep water oil fields in the Krishna-Godavari (KG) Basin.

The company deployed USD 12 billion and kept a few hundred variables on a tight leash that could have derailed the project. Goldman Sachs reckons over the next couple of years, RIL will generate USD 25 billion in excess cash.

Then there’s another Rs 9,500 crore it is sitting on after sale of treasury stock over the last six months and having 13 crore more treasury stock which will be sold before march 2011. What will he do with all this money?

From another perspective, margins in the core operation are down to half of what they used to be earlier. To that point, in spite of the doubling up of capacities, company’s earnings are stagnant. How can he therefore deploy this money in resourceful ways to ensure the growth engine doesn’t slow down?

“The low debt equity and increased pressure will led to the psychological pressures on Reliance to do something with the money,”

Attempts to tackle these questions led to answers like retail and real estate through the special economic zone route. By all accounts though, both of these projects where Ambani invested Rs. 500 crore and Rs. 2,000 crore, respectively, haven’t quite taken off.

The recent settlement between ambani brother has opened the new avenue for ultra-power project and telecom foray for the company so they can use their cash in effective manner to get the goal of growth.

All pointers are he’s selected to take his foot off both and focus on the core work of the company.

Unfortunately for RIL, soon after it pitched for LyondellBassel, Apollo Management, a private equity firm, got into the game and upped the ante by offering USD 15 billion. On his part, Ambani was unwilling to offer anything more than USD 14.5 billion.

So, just what are the options in front of RIL?

Option 1: Emphasis on becoming an integrated oil major and ultimately aim for breaking into a league now occupied by the six biggest in the world (derisively called Big Oil).

Though it prides itself on being integrated, RIL does not have the equilibrium of upstream oil exploration, production and refining capabilities the majors have.

There are big gaps in terms of exposure to key oil and gas basins, that are vital and need to be filled and Reliance is better positioned than any other Indian oil and gas company to get there

Option 2: Become bigger petrochemicals and refining player, with increased global company, through acquisitions and buy out and what they are doing it.

Let see what management is stock market is also watching and investors are aloso in doubt as the company is doubtful market is giving price to the above doubt and share price of the company is not doing anything since last year .

INVESTOR PSYCHOLOGY..

Investor psychology:)>

ONE: Investors behavior is quite funny especial the shallow pocket and and small investor,they have the tendency to chase the mad rush when asset price is rising like any thing then they tend to buy the asset without taking care of the value of the asset.

TWO:They reluctant to book profit swiftly because greed comes in the way and this act is the missed opportunity and sometime led to loss.

THREE:They don't want to buy in the panic market because they feels it will go down further and this act led lo missed opportunity when market bounced.

FOUR: They always look at their sold asset and when it go up after sell they think and frustat

Derivatives Definition..

Derivative is a product whose value is derived from the value of one or more basic variables, called bases (underlying asset, index, or reference rate), in a contractual manner. The underlying asset can be equity, forex, commodity or any other asset. For example, wheat farmers may wish to sell their harvest at a future date to eliminate the risk of a change in prices by that date. Such a transaction is an example of a derivative. The price of this derivative is driven by the spot price of wheat which is the "underlying". In the Indian context the Securities Contracts (Regulation) Act, 1956 (SC(R)A) defines "derivative" to include-

1. A security derived from a debt instrument, share, loan whether secured or

unsecured, risk instrument or contract for differences or any other form of security.

2. A contract which derives its value from the prices, or index of prices, of underlying securities. . . Derivatives are securities under the SC(R)A and hence the trading of derivatives is . governed by . the regulatory framework under the SC(R)A.

what GE does...

General electric one of the greatest company known for their innovative approach to change the world around them. The core competency of the company is their approach to the future .I am quoting the statement of the CEO of the company.

At GE we ask, “Why predict the future when you can create it?” From our earliest days, our company has used the tools of research, combined with a little inspiration, to create the world of tomorrow. The legacy of GE’s ingenuity offers a rich history we are proud to share with the world.

Look!!!!! The GE approach to their business

Gold is Hold....

Investor should keep their opinion on gold is on hold because gold is a good hold at this level.Globally gold as the asset class has shown their great interest by the investor in last few years, the renewed interest has been generated in gold due to recession and slowdown in economy. In the time of recession the equity has crashed significantly while the gold has hit their high the safe heaven buy by the investor ,hedge fund buy by to protect the investment and buying by central banks around the globe for the liquidity infusion in the system has led the buyout sentiments in the gold market. The gold has the tendency to outperform the all the asset class at the time of slowdown in economy it was also proved in the current slowdown. The global condition is yet to come out of wood so gold is hold and even a good buy at current level.

Hold in gold strategy will give good return in next six month.