Eye On Future, RIL Builds On Growth

IF RELIANCE INDUSTRIES chairman Mukesh Ambani were to paraphrase the late Dhirubhai Ambani’s advice over the years on strategy, it would probably read — “Act big, Act fast, Act ahead. Future is no one’s monopoly”. Since the day Reliance Industries (RIL) chairman shook, reimagined and rebuilt India’s communication industry with the launch of Jio in 2016, the surge of confidence in the group has led to the roll-out of several super capital-intensive projects targeted at the future.

In the last three years, RIL has been focused on building projects which would consolidate future leadership. Sources close to Ambani state that he is building a foundation for what his children will do in future. A bouquet of green projects — manufacturing of solar panels, battery and hydrogen at large scale — is one such business. The massive retail expansion with digital support, 5G rollout, innovations for 6G, and building financial services business (outside RIL) with global tie-ups also have Ambani’s signature future focus. Moreover, the mainstay fuel business is transitioning to large-scale petrochemicals production.

As the future plays out in everything inside RIL, it’s the present that is throwing up the resources to fund it. Despite geo-political conflicts, disruptions in commodity trade flows and economic downturn, the company posted a net profit of ₹66,702 crore in FY23, up 10% year-on-year, while total income increased 25% to ₹9,20,274 crore. “Consumer businesses continued their growth trajectory with rapid expansion of retail store footprint and strong subscriber acquisition in Jio… Oil and gas segment registered strong performance with sustained gas production from KG D6 block,” Ambani says in his annual letter to shareholders.

Expansion has been fast. Reliance Jio, which launched 5G last year, has deployed over one million 5G cells with coverage across 8,000 towns by end-September. “By December 2023, we will complete pan-India rollout of 5G services and set a new global benchmark for the fastest rollout of a 5G network across a large nation,” a company statement quoted Ambani after the Q2FY24 results. Elder son Akash is in charge of the digital business Jio Platforms Ltd (JPL), which recently launched air fibre. JPL recorded 23.5% YoY growth in profit to ₹19,124 crore in FY23 as revenue from operations increased 20.2% to ₹98,099 crore.

Meanwhile, Reliance Retail Ventures (RRVL) recorded a 30.1% spike in profit to ₹9,181 crore in FY23 compared with the previous fiscal, while revenue increased 32% to ₹2,30,931 crore. RRVL has 18,650 stores across the country with 71.5 million sq. ft. area as of September 30, 2023. Digital commerce, including JioMart and Ajio, contributed 19% to RRVL’s revenues in Q2FY24. “Our focus on customer centricity backed by investments in technology, innovation and new business segments have helped us create operational excellence and steer the transformation of India’s retail sector,” says Isha Ambani, who spearheads Reliance Retail, after announcing the company’s FY23 numbers.

In the traditional oil-to-chemicals (O2C) segment, revenue increased 18.7% to ₹5,94,649 crore in FY23, while earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 17.7% to ₹62,075 crore. About 57% of operational revenue in the O2C segment came from exports. Access to the global market and ability to reach end consumers aided margins, despite volatility in the crude market. The company posted a better EBITDA despite a windfall tax payment of ₹6,648 crore.

Another major milestone for RIL in the last two years is the turnaround of the Krishna-Godavari (KG) basin, in which BP Plc holds 33% stake. The oil and gas (exploration and production) business recorded a 120.3% jump in revenue to ₹16,508 crore, while EBITDA was up 149% to ₹13,589 crore due to higher price realisation and increase in production. RIL and BP developed three deep-water gas discoveries at KG D6 in the last four years, spending about $5 billion.

All of RIL’s three core businesses — O2C, retail, and digital services — are now self-sustaining with strong cash generation, HSBC Global Research says in its report. “Investment plans for new energy should kick-start another engine of growth. Capex intensity continues on both the retail front and the digital side. O2C will likely remain lacklustre given weak macro and new capacity commissioning,” it says.

Setting The Future

RIL, which aims to cut down net carbon emission to zero by 2035, is also expected to commission a series of projects, including a PV module factory, storage battery factory, and green hydrogen plant starting next year. It will establish a 10GW solar photovoltaic (PV) factory in Jamnagar. The production of battery packs will begin soon after. The plan is to scale up production to a fully integrated 5 gigawatt hours (GWh) annual cell-to-pack manufacturing facility.

In 2025, RIL plans to commission the 20 gigawatt (GW) solar power generation project. The output will be fully utilised for the company’s green hydrogen production.

It has earmarked ₹75,000 crore to build five giga factories — an integrated solar photovoltaic module factory, an advanced energy storage battery factory, an electrolyser factory, a fuel cell factory, and a power electronics factory — in Jamnagar. Ambani has said the company is ready to double its investment to further scale up the new energy manufacturing ecosystem that intends to produce 100GW of solar power infrastructure by 2030. RIL had introduced its hydrogen internal combustion engine technology for heavy-duty trucks and buses in February. It is also exploring hydrogen fuel cell technology solutions and is partnering with auto manufacturers.

The group has tied up with leading companies globally in solar, battery, and ectrolyser manufacturing. The company is developing 5,000 acres of land in Jamnagar to build the giga complex. It has two refineries and a petrochemical complex in the vicinity.

Reliance New Energy Solar (RNESL), a wholly owned subsidiary of RIL, acquired REC Solar ($771 million), Sterling Wilson (a 40% stake for $240 million), U.K.-based Faradion ($100 million), and invested in Germany-based NexWafe ($30 million). It signed a cooperation agreement with Denmark-based Stiesdal A/S for technology development and manufacturing of hydrogen electrolysers in India. RNESL also invested $50 million in Ambri, an energy storage company based in the U.S.

In the digital and communication business, the conglomerate has developed an end-to-end 5G stack, which is fully Cloud native, software defined and digitally managed, with support for advanced features such as quantum security. Ambani says over 2,000 engineers of Jio developed the 5G stack in-house over the last three years. At the spectrum auction last year, Jio acquired the largest wireless spectrum for 5G for ₹88,078 crore.

Reliance Retail, on the other hand, focuses on acquisition of assets and tie-ups with global brands to widen its portfolio. The acquisition spree, which started with Hamleys in 2019, continued in 2020 and 2021 with Netmeds, Urban Ladder, Zivame, Justdial, Portico, Dunzo, Shri Kannan Departmental Store and Milk Basket. It recently took over German retailer Metro AG’s cash and carry business in India in a deal estimated at around ₹4,000 crore. The company also has a master franchise agreement with Texas-based convenience stores chain 7-Eleven.

Besides acquisitions, new format launches during the year included Smart Bazaar, Azorte, Centro, Fashion Factory and Portico. Reliance Retail also forayed into FMCG and beauty businesses with the launch of several products, including the iconic beverage brand, Campa, and digital commerce platform, Tira.