Decoding Reliance’s Master Plan: Going Debt Free, Future Plans, and Competition and Expansion

If Reliance were a country with its GDP equal to its market capitalisation, it would be the 58th richest country as of 14th July 2020 with its market cap ($159000 mn) greater than GDP of countries like Kuwait, Iceland, Sri Lanka, etc. Mukesh Ambani had surpassed Elon Musk and Larry Page to become the 6th Richest Person on Earth (but fell back later). RIL’s stock price more than doubled in three months. RIL is also the first Indian company to achieve a market capitalization of $150 billion.

Decoding Reliance's Master Plan (1)

For the past few months, we have been hearing news about various big companies investing in Jio despite the slowdown due to the Covid-19 pandemic. Jio has seen the likes of Facebook and Google investing in it. These competitors investing in the same company and working with them highlights the potential of Jio and its growth prospect.

But Reliance had a debt problem for the past few years. In the last 10 years, its gross debt had increased 420%, interest expenses had increased by 691% while the profits had increased by only 63%. This called for some stringent action.

Decoding Reliance's Master Plan (2)
Source: businesstoday.in

How Did Reliance Become Debt-free?

The target to make the company debt-free was taken at RIL’s 42nd Annual General Meeting on August 12, 2019. The company’s net debt was Rs 161,035 crore as on March 31, 2020.

From April onwards the company started selling stakes starting with Facebook, the biggest of all investments. Reliance also rolled out a rights issue selling stocks at 14% discounted rate to the willing current stock owners to raise funds for the company. It was the largest rights issue ever.

S NoInvestor In Jio Platforms LimitedDate of InvestmentInvestment Amount  (₹ Crore)% Stake
1Facebook, Inc.22nd April 202043,573.629.99%
2Silver Lake Partners4th May 20205,655.751.15%
3Vista Equity Partners8th May 202011,367.002.32%
4General Atlantic17th May 20206,598.381.34%
5KKR22nd May 202011,367.002.32%
6Mubadala5th June 20209,093.601.85%
7Silver Lake Partners (additional investment)5th June 20204,546.800.93%
8Abu Dhabi Investment Authority7th June 20205,683.501.16%
9TPG13th June 20204,546.800.93%
10L Catterton13th June 20201,894.500.39%
11PIF18th June 202011,367.002.32%
12Intel3rd July 20201,894.500.39%
13Qualcomm12th July 2020730.000.15%
14Google15th July 202033,737.007.7%
Total ₹ 152,055.4532.94%
RIL RIGHTS ISSUE20th May to 3rd June 2020₹ 53,124.20 
FUNDS RAISED TILL 17/07/2020 ₹205,179.65 
Funds Raised

By mid-July, Jio saw investments from some of the biggest companies of the world like Intel, Google, Facebook, etc.RIL, led by Mukesh Ambani, became debt-free by July eight months ahead of the deadline March 2021. Jio has been successful in getting investors from various sectors like technology, healthcare, petrochemical, real estate, energy, social media, etc.

Why Investments were made in Jio?

India has the world’s second-largest and fastest-growing internet user base. India has the world’s fastest-growing e-commerce at 30%+ CGAR. India’s share in global traffic has increased from 1% to 17% in 4 years. Since Jio’s launch, India has seen a 40x increase in data consumption. Digital economy can create 60 to 65 Mn jobs and over $1 trillion economic value in India. Hence there is scope for enormous growth. Jio has been working in the digital economy for quite some time now.

Though a bunch of revenues of Reliance come from petrochemical business, revenues from Jio and Retail have been picking up. Hence these investments were made in Jio.

Decoding Reliance's Master Plan (3)
Source: businesstoday.in

Highlights of Reliance AGM 2020

Reliance held its first virtual AGM (43rd) on 15th July which was watched by over 5.5 Lakh people. It wasn’t just giving the shareholders an annual report, it was presenting the world the goals and capabilities of the company and making big announcements. The fact that it had recorded messages from Mark Zuckerberg and Sundar Pichai, the leaders of giants Facebook and Google show the significance of the event.

Let’s look at some key announcements-

  • Google Investment and Deal

 Google’s investment of 33734 Crore Rupees for a 7.7% stake was announced which was part of Google’s 10 Bn Dollars investment plan in India. Jio and Google have joined hands to develop a new affordable smartphone with an optimized Android system and Play Store. They are planning to launch a cheap 5G smartphone too.

Google had earlier tried to roll out an affordable smartphone through its Android One programme. But that project faced its own issues. Partnering Ambani could bring the mojo back into Google’s ambitions to enable low-cost devices.

Reliance plans to make India “2-G Mukt” i.e., free of 2G. By partnering with Google and launching phones with new Android systems that are affordable to people, Reliance aims to boost data consumption and penetration into the rural market which comprises a large part of the Indian market.

  • Facebook Deal

We are privileged to enter into another strategic partnership with Facebook, one of the very best technology companies in the world. Both Facebook and Jio share a strong vision for digitally empowering consumers as well as small businesses and entrepreneurs across India. 

Mukesh Ambani

Facebook-owned WhatsApp will tie-up with JioMart, Reliance’s aim to connect thousands of Kirana stores (small-shop owners) to the internet. WhatsApp serves as a good platform as over 340 Mn Indians are already its users.

  • JioMart

It has already launched a beta version starting with 200 cities and its planning to advance from just grocery and food products to electronics, fashion and smartphone. It is planning to take on Walmart backed Flipkart and Amazon and revolutionize the e-commerce space.

  • 5G

Reliance announced it is planning to roll out 5G in next year. Mukesh Ambani said it is in accordance with PM Narendra Modi’s vision of “Atmanirbhar Bharat” (Independent India).

This announcement is faced with scepticism as this faces many problems like that of spectrum allocation. Also, it may be too expensive for most Indians so it’s unlikely to make a huge impact yet.

  • Jio TV+

Another ambitious project is to aggregate multiple content platforms on Jio’s Set-Top Box — Netflix, Amazon Prime Video, Disney+Hotstar, EROS Now, YouTube, etc.! Bringing Amazon Prime and Netflix together will be an amazing step to promote web-content in the country.

  • Jio Glass

It is one of the most innovative announcements of Jio yet.

Jio Glass is at the cutting edge of technology that provides best-in-class Mixed Reality services to give users a truly meaningful immersive experience.

Kiran Thomas, President of RIL
JioGlass

It will be connected to a smartphone by a wire and supports 25 apps. It would enable augmented reality video meetings, games and more with a high-definition display. Hope it doesn’t end up like Google Glass which failed due to bad marketing.

Other highlights of the AGM were JioHealthHub — a platform that provides end-to-end healthcare services including online video consultation with doctors, lab tests, etc, unveiling its online education app Embibe, target to be net carbon-free by 2035, target to connect over half a billion mobile customers, over a billion smart sensors and over 50 million home and business establishments in three years, looking for strategic investors in Retail and oil business etc.

Shareholders and the public were disappointed to hear the status of deal with Aramco, one of the largest companies in terms of revenues in the petroleum sector, which was delayed due to negative oil market developments.

Its share price collapsed some points by the end of the AGM as most of the announcements were expected and very few new things were announced, and also because of the delayed deal with Aramco.

Competition and Expansion

Reliance, after the launch of Jio in September 2016, has expanded into various sectors competing with other big players in the game.

Jio was initially launched as a mobile network operator with a welcome offer which offered free internet, calls, and SMSs. This gave Jio a large number of users which ultimately transformed to paid customers. Jio now has over 370 mn active users (almost one-third market share) taking on the likes of Airtel and Vodafone.

Jio has ventured into various spaces like

  • Broadband internet: JioFiber
  • Wifi routers: Jiofi
  • Smartphones: LYF and JioPhone
  • Browser: JioBrowser
  • Video Streaming Service: JioTV and JioCinema
  • Instant Messaging: JioChat
  • e-News: JioNews
  • Payment: JioMoney
  • Music Streaming: JioSaavn
  • Health: JioHealth
  • Etc.

The most recent one of them was the introduction of JioMeet, a video conferencing app launched on 2nd July. It was announced in the AGM that it has crossed 5 mn downloads in just 2 weeks of its launch. The JioMeet app was designed to counter the Zoom app which saw a huge boom due to lockdown and an increase in the use of video conferencing. The UI(user interface) had an almost complete resemblance to Zoom. This became the talk of the town as most media agencies and social media covered it, which eventually led to its publicity rather than criticism. The launch was also done just after PM’s “Atmanirbhar Bharat” dream which led to citizens switching to Indian apps. This can be said to be an effective marketing technique to counter the rival. Same can be said for JioChat which had a sheer resemblance to WhatsApp.

Resemblance between Zoom and JioMeet

Brief History and Expansion

Reliance started off as an exporter of spices and fabric in 1958, then expanded in the textile industry in 1966 and with time made petrochemical its primary focus. It then expanded to the healthcare and telecommunication sector. It has extended its arms into media, education, payment, e-commerce, retail, etc.

Reliance now has brands in various sectors

  • Polymers- Relx, Repol, Relene, etc.
  • Chemicals- Relab
  • Polyesters- Relcron, Relpet, etc.
  • Petroleum Retail- Reliance Gas, Reliance Petroleum Retail, Reliance Aviation, etc.
  • Textiles Owned Brands- Vimal. Nice, DeO2
  • Retail Owned Brands- Reliance Fresh, Reliance Digital, Reliance Jewels, Reliance Smart, Trends, Ajio.com, etc.
  • In-store Brands- John Players, DNMX, Snactac, LYF, Enzomatic, Performax, etc.
  • Digital Services- JioGST, Jio Motive, Jio Home, Jio Security, HelloJio, JioNet, JioGames, JioAds, etc.

Reliance is also in partnership with various international brands like Gas, Diesel, Burberry, Hamleys(Toy Store), Vision Express (Optical Speciality), Superdry, PotteryBarn (Home Furnishing), etc. Reliance also owns a cricket franchise Mumbai Indians in Indian Premier League.

Reliance at war with everyone
Source: finshots.in

Jio has changed India’s digital scenario. Reliance has taken on competition from various industries and sectors; online and offline. Reliance is expanding in various sectors and trying to establish its dominance in them. This has been inspired by Amazon. Amazon has successfully entered in most sectors and has performed well. It would be interesting to see if Reliance can do the same.

Amazon at war with everyone
Source: finshots.in

Indians have always heard, “Can India develop the next Google?” Now Indian’s are waiting to hear, “Can America develop the next Reliance/Jio?”

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