There have been quite a few ambitious announcements by the Reliance-Anil Dhirubhai Ambani Group (ADAG). However, the most difficult to achieve seems to be its plan to ramp up capacity to 25,000MW by 2015

Given that R-Power's current capacity is just 600MW and even assuming that it grows eight times to 2,000MW in two years, Reliance ADAG's plan to touch 25,000MW by 2015 and 35,000MW by 2017 seems unrealistic. The rule of thumb is that you need roughly Rs40.5 million per MW - therefore, it would seem that ADAG will need more than Rs1 trillion to achieve its target. Even if we assume 70% debt, it will have to raise a mind-boggling Rs300 billion in equity. Seems like an uphill task. The second problem is execution. Most of its projects have already fallen behind schedule.

A Kotak report today says, "Targeted capacity of 25GW by FY2015E is ambitious given the high degree of execution risks involved. Our scepticism stems from the present status of projects, which are significantly lagging their original execution schedule." It points out that the current capex run rate is sluggish at Rs35 billion in FY10 which is marginally lesser than Rs37 billion in FY09, indicating sluggish execution. Out of its IPO proceeds of Rs116 billion, it has only used Rs55 billion.

Kotak also points out that its plans to expand its gas-based capacities face high fuel risk. R-Power plans to set up 10,000MW of gas-based capacities with 7,480MW in Dadri and 2,400MW in Samalkot. Kotak believes that Reliance Power's current valuation of 2.3x FY12 net worth is expensive given execution and fuel uncertainties and the fact that a large portion of capacity would be UMPPs (12,000MW) which are usually not value accretive given competitive bids.

In the last two months Reliance Power's stock is pretty much stagnant at around Rs160 levels, after falling from a high of Rs190 in July.

Anil Ambani also assured Reliance Communications shareholders that the company would be debt free in the next three years. Market reaction to this announcement has been scepticism. RCom has a huge debt of Rs300 billion and the plan was that the stake sale in Reliance Infratel, RCom's tower arm would help retire some of this debt. However, even after being in the news for the last many months this deal has not come through. The investor approach seems to be - we will believe it when we see it. In the AGM, ADAG said that RCom's capital expenditure would be only fourth of what it had been over the last three years implying that free cash flows would help it retire debt.

RCom's stock fell from a high of Rs205 in late June to around Rs155 late August. Since then it has recovered to Rs170 levels.

Shareholders' hopes from Reliance Capital may be on a bit more firmer ground with ADAG talking of its ambition to create a bank and listing the life insurance business. However, even both these are not new announcements and are already known to the market and long awaited. Reliance Capital's share price has been among the best performing in the ADAG pack, moving up from a low of Rs611 in May to around Rs850 recently.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife).