Reliance maneuvers into biotech

India's Reliance is looking to biotech and infocom as its new areas of growth

By Kristie Lu Stout
CNN.com Writer

NEW DELHI, India (CNN) -- Reliance, one of India's largest industrial conglomerates, is expanding its empire with the creation of a biotechnology unit.

The petrochemical and polyester giant will hold close to 50 percent of the proposed entity, to be called Reliance Biotech, according to the Economic Times.

With a large free cash flow of over $1 billion, analysts say Reliance is hungry for new areas of growth in addition to its existing investments in the telecom and power sectors.

Biotech in Bangalore

Reliance will set up a biotech lab on the outskirts of Mumbai as well as a biotech research institute in the southern city of Bangalore -- India's high tech capital.

According to the Economic Times report, around 150 employees formerly of Reliance's biotechnology division will be shifted to the new company.

Executives at Reliance say they are unable to comment further on the new venture.

Reliance owns major stakes in Reliance Industries, India's largest petrochemical company, and Reliance Petroleum, the nation's biggest private sector refining company.

It also owns Reliance Infocom, the spearhead of the group's information technology ventures.

Reliance Infocom proposes to lay an optic fiber broadband network spanning 115 cities in India.

Need to expand

QUOTE "What is changing the complexion of Reliance is really Infocom." - Merrill Lynch India analyst Jyotivardhan Jaipuria

Analysts say Reliance's recent foray into infocom and biotech is a response to its need to expand.

"They are trying to find new areas for growth," says Merrill Lynch India analyst Jyotivardhan Jaipuria.

"They have a large free cash flow of over a billion U.S. dollars and are looking for growth areas to utilize the cash."

In contrast to Reliance Infocom, analysts don't see tremendous revenue potential from Reliance's biotech venture.

Analysts are also skeptical of the impact Reliance Biotech will have on the company.

"Biotech won't be very big for right now in terms of size. What is changing the complexion of Reliance is really Infocom," says Jaipuria.

ENDS

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