Ambani’s Tele, Retail Conquests

TEN YEARS BACK, when Mukesh Ambani started work to build a 4G telecom company from scratch, it was hardly anticipated that Jio would topple incumbents Bharti Airtel and Vodafone Idea. Skeptics cited RIL’s inability to crack consumer businesses, since Reliance Retail was struggling against rivals, including Future Retail and DMart. Just four years later, in 2019, Ambani proved them wrong, telling shareholders, “Skeptics used to say Reliance cannot succeed in consumer businesses. Jio and Reliance Retail have proved them wrong.”

Years passed. Some rivals shrunk while some others, including Anil Ambani’s Reliance Telecom, disappeared. Another four years later, in March 2024, Reliance became the first Indian company to cross ₹1 lakh crore in pre-tax profits. In February 2024, it became the first Indian company to cross ₹20 lakh crore in market capitalisation. Ambani cites the accelerated expansion of Jio’s subscriber base and the expansive omni-channel presence of Reliance Retail as the main reasons behind RIL’s improved performance. Net profit increased 7.3% YoY to ₹79,020 crore in FY24, while gross revenue rose 2.6% to ₹10,00,122 crore.

“Jio turned a data dark India into a data rich nation, supplying every Indian home with affordable, high-speed 4G data,” says Ambani in the FY24 annual report. Jio rolled out its 5G network across the country last fiscal, and launched JioBharat smartphones. “We are also making concerted efforts in building capabilities in evolving technologies such as AI/ML, AR/VR, robotics, natural language recognition and processing,” says Ambani.

Abu Dhabi Investment Authority (ADIA) invested ₹4,967 crore in Reliance Retail Ventures Ltd. (RRVL) in October last year, valuing the company at ₹8.4 lakh crore. “With our all-encompassing range of products, we have become an integral part of the lives of our consumers. Our new commerce initiative is also playing an important role in supporting small indigenous merchants and kirana shop owners,” says Ambani.

Hydrocarbon exploration and production assets in the KG basin, which has been a drag on RIL’s balance sheet, now accounts for about 30% of India’s domestic gas production with the commissioning of the MJ Field in the KG basin. BP Plc holds 30% stake in the assets. The company’s domestic gas production rose 53.2% YoY to 268.6 billion cubic feet (BCF) equivalent in FY24, resulting in an EBITDA growth of 48.6%. The transportation fuel segment’s production was up at 67.8MT, up from 66.4MT due to higher throughput and healthy demand. However, the margin environment remained challenging due to heightened refinery supply and global dynamics. Slowing polymer demand, which pulled down prices, is another worry for RIL. The company expects domestic demand to rise 6-8% in FY25, driven by construction, automotive, packaging, and consumer goods sectors.

RIL is building a Green Energy Giga Complex in Jamnagar that will help the company turn net carbon zero by 2035. The complex will have five Giga factories for integrated solar photovoltaic module, energy storage battery, electrolyser, fuel cell, and power electronics. “We are also exploring technologies for capture and recycling of carbon,” Ambani says in the annual report. The energy division will commission its first train of module and cell manufacturing this fiscal.

Adding New Assets

A chemical engineer himself, Mukesh Ambani has a track record of building greenfield assets. He led the creation of India’s first private refinery in Jamnagar in the late 90s. The five Giga factories have the capacity to create infrastructure to generate 100GW of electricity from solar energy.

For the next round of growth, Ambani has earmarked ₹2 lakh crore for 5G and ₹75,000 crore for Giga factories. Another ₹75,000 crore will be spent to expand petrochemical capacities by 2027. Over the past three years, 90% of the company’s capex has been funded by cash profits.

In addition to building large capacities, Ambani is keen to foray into new businesses as well. RIL recently demerged its financial services arm into a separate listed entity, Jio Financial Services (JFS), which inked a JV with US-based investment giant BlackRock to create an asset management business. Another new business, Reliance Consumer Products, created in November 2022 under RRVL, is enhancing its portfolio with brands across categories — home essentials, food and beverages, confectionery and personal grooming — besides acquiring legacy ones such as Campa and Lotus. Ambani’s daughter Isha is in charge of the business.

Unlocking Value

It was a massive fundraising from Facebook, Google and global private equity investors that changed the view on Ambani’s new businesses. When the world was in lockdown after the breakout of the pandemic in March 2020, Ambani raised ₹2.4 lakh crore and turned RIL net debt free. The company also raised ₹53,124 crore through rights issues.

RIL’s two new businesses became industry leaders, with ₹21,423 crore profit from JFS and ₹11,101 crore from RRVL in FY24. While Jio currently has 482 million subscribers, the retail arm has 18,836 stores across the country. Investors see it as the moment for value unlocking. Foreign brokerage Jefferies expects Jio’s public listing by 2025. Recent tariff hikes by the telecom giant hint at a possible public listing, it says.

Reliance Retail is also preparing to hit the capital market. The company, which is rationalising store footprint to improve margins, shut around 230 stores in the June quarter to re-align its operations. In its recent report, brokerage Centrum Institutional Research values the retail business at ₹10.9 lakh crore, against ₹5.6 lakh crore for digital and ₹2.3 lakh crore each for refining and petrochemicals businesses.

The Ambani family owns the world’s most expensive private residence, Antilia, in Mumbai, besides private jets and super cars. They added luxury properties to their fold as Reliance Industrial Investments and Holdings bought Britain’s iconic country club and luxury golf resort, Stoke Park, for an estimated ₹592 crore in 2021. Ambanis have also built the iconic Jio World Centre and Nita Mukesh Ambani Cultural Centre at Bandra-Kurla Complex in Mumbai.