Reliance's acquisition move a right step: Cyrus Daruwala

he market is abuzz with Reliance's much awaited proposed acquisition of LyondellBasell. In an interview with ET Now, Cyrus Daruwala, MD,

Financial Insights gives his thumbs up to Reliance bid and says that telecom sector industry will be biggest recipient of foreign direct investments outside infrastructure projects.

How do you read into this move of Reliance Industries going ahead and making this acquisition (of LyondellBasell), what's your take on the stock?

Most of the underperforming stocks that we have had there were ready for the picking. Inevitably what is happening is that most of the stocks are showing a huge amount of fluctuation and or the industries that you see are slightly speculative. But most of the foreign direct investments as well as the joint ventures that you see now are long term bets as they are fundamentally sound and are in the areas of growth.

How do you see things progressing from here? Is it the right time for the Indian companies such as Reliance Industries to make a mark on the global arena by taking up assets which might find it difficult to achieve valuations given that there are a lot of bankrupt companies out there?

It is correct. now two ways to skin that cat when Tata goes ahead and acquires something like a ailing asset it's not just for a global reach or because they are under evaluated. There is also a long term business synergy between the Tata Motors Groups as well as Jaguar as well as Range Rover.

Likewise, the other industries especially within the petrochemical industries - whether they are in cements, in refineries, in steel - are on the radar of the Indian companies and it is part of a long term synergitical move. They themselves benefit from some of the best practices, a good reach within the global market from an experts' point of view and in return they are also expanding their footprint by acquiring cheaper assets.

In that case would you approach Reliance Industries with a buy call given the potential of this investment and this acquisition?

I certainly would. Reliance has made a couple of these astute investments in the past. The slight volatility of their stock would not deter me as an investor that is backing Reliance into this deal. So yes it would be a buy.

What kind of an earnings upside do you see given that LyondellBasell is a distress asset? It's a bankrupt company and they are still working out their debt. So what kind of an earnings of potential do you see on the bottom line if these two companies were to come together?

I would say they would expedentially and instantly look at least about a five per cent jump in revenue, which is a much needed indicator. New revenues as well as the consolidated revenue marks are looking at about five per cent year on year growth. At least in the first instance that we have conservatively done the assessments going forth, I think the target that they would have would be a fairly ambitious between 7.5 to 12 per cent growth year on year to recoup the investments that they are going in with.