Reliance and Cap Gemini. Huh?

Posted by: Manjeet Krpalani on February 17, 2008

The latest rumour about Reliance Communications bidding for Cap Gemini has people scratching their heads. Reliance Communications, headed by Anil Ambani, does media and telecom. Cap Gemini does software and tech outsourcing as also tech and business consulting. There’s no synergy between the two.
But it suits both companies to be in the news.
Cap Gemini is the least high profile among the top tech Western firms, way, way behind IBM, Accenture, EDS and CSC. It has operations in India, but without the heft of its larger peers. A couple of years ago, there were rumours that Indian tech giants Infosys, then Wipro, would bid for Cap Gemini, as it would be a perfect buyout candidate for Indian firms looking to go global. But nothing happened. The rumours kept resurfacing. Cap Gemini,it appears, is like one of those eligible singles, always being teamed up with various suitors in the gossip columns, but never an engagement announcement. These rumours will remind the market that Cap Gemini is around, even if it’s in the shadows.
Reliance Communications is a young Indian company with a big ambition of being the most eligible, hip player in the business.

Founder Anil Ambani has longed to get into the software business but lacked the experience and the "start-in-the-garage" intuition that that Silicon Valley-type of business requires. So instead, he has a media, telecom, finance and power business. But Anil Ambani appears strapped for cash just now - he's been heading to the stock market to raise money for both his power and telecom businesses. And he's already been burnt - the $3 billion Reliance Power IPO, announced in January before the US sub-prime bust and recession announcement, listed only in February, in a new, unfavourable environment. The stock sank as soon as it listed, closing down 17% on the first day of trading.
It seems unlikely that Ambani, known as a sharp businessman, would spend money on software - a trophy business he doesn't need nor has the management bandwidth to support just now. And after the Reliance Power listing debacle, investors are unlikely to support him for a software acquisition.
But the Cap Gemini rumor will probably work wonders for the Reliance stocks. It could make some investors feel that Ambani is still in the game, and hasn't fallen off his edge.

Reader Comments

Mohanan Sreedharan

February 19, 2008 10:32 PM

The time is not ripe for Anil Ambani to bid for Cap Gemini.
Anil has commmited himself to many business and his experience in many still novice.
Just along with what he is envolved now and see how sucessful he becomes.

PinkPanther

February 20, 2008 9:44 AM

I don't know the maturity of the blogger, i wish people do some research before talking to world. 30 years back Reliance was a polymer based cloth manufacturing company. Today, they are in oil & gas exloration, refining, communication, health-care, IT and many other business. It did not happen overnight. The whole empire was created by a 4th grade pass, hard-working and shrewed businessman. All businessman required is vision. No need to be present in a business arena. The moment s/he thinks to enter the market and capture it, it can be done. If you want, I can give you few more names... They had nothing, today they sit on pile of buisiness you would never imagine. Reliance comm, taking over CGEY may be only a "news item" but the day a businessman whims about it, it can be done. Reliance IPO may have lost 17%, it is due to market condition. Not because, Anil does know how to do business. Even in this condition, an issue listed at 350+ rate itself is an achievement. Looks like you lost some money in intra-day trading on that IPO??
Too bad, people have no vision, no good words to share!!

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