By Aaron Chaze
Reliable growth: India’s largest company expands its reach
Reliance Industries, India's largest company by market value and owner of both India's largest gas field and the world's largest crude-refining complex, has successfully acquired a 40% stake in Atlas Energy's shale gas properties in Pennsylvania's Marcellus shale formations. Reliance agreed to pay $1.7 billion for this stake in 300,000 acres, of which $340 million is an upfront payment and $1.36 billion will be invested in development. Reliance also gets an option to purchase a 40% stake in all additional acreage acquired by Atlas Energy and retains preferential rights to purchase an additional 280,000 acres from Atlas for $2.24 billion, which will considerably reduce the per acre acquisition cost. This acquisition represents the first major overseas success for Reliance since its unsuccessful bid for chemicals giant LyondellBasell Industries and its attempt to purchase a stake in the Canadian oil sands. Reliance says that it expects to invest $5 billion in this venture over a 10-year period.
Securing energy supplies for Indian industry is critical, as economic growth remains rapid—although it appears to be slowing slightly. India's Index of Industrial Production (IIP) grew by 15.1% year on year for February 2010—less than January's year-on-year output growth of 16.7% and December's 2009 growth of 17.6%, but still the fifth consecutive month that saw double-digit IIP growth. The key sectors driving this growth were capital goods, with a 44% increase, consumer durables, up by 30%, and manufacturing, which grew by 16%. According to the Indian finance ministry, the strong performance from key economic sectors, especially in manufacturing and IT services exports, is expected to push up GDP growth for the January-to-March quarter this year to 8.5% year on year. The finance ministry estimates that in order to meet the 7.2% growth target for the full year, GDP growth must be at least 8% in the fourth quarter this year.
Sustained growth in industrial production is not the only economic phenomenon unfolding in India. Venture capital and private equity financing of Indian companies in the January-to-March 2010 quarter rose to a six-quarter high of $2 billion, a year-on-year 280% rise from the $526 million in investments in the period last year. Average deal sizes, too, have gone up to $25 million from $10 million in the previous year.