Reliance Industries: The Sky Is No Limit

The year 2017 was a landmark year for Reliance Industries. It marked 40 years of its now famous IPO that is said to have kick-started India’s IPO mania. Reliance has been topping the BW Real-500 rankings for a long time now, and has income and assets of over Rs 12.12 lakh crore, the criteria for our rankings, making it one of the most valuable companies in the Indian economy as it plays an ever-growing role in shaping the growth of the country.

From its IPO days, Reliance Industries has undergone a huge change in its business model. Gone are the days when it was just a run-of-the-mill textiles and polyester company. India’s biggest firm is now an integrated entity across energy, materials, retail, entertainment and digital businesses.

Such has been the its transformation in the last decade that analysts now liken it to digital pioneers such as FAANG (Facebook, Alibaba, Amazon, Netflix, Google). Harendra Kumar, managing director, Elara Securities said in a note: “Intuitively, it is difficult to imagine Reliance as India’s largest consumer company. Or for that matter, even as a leading technology, media and internet company in the fastest growing economy in the world. It is the antithesis of whatever Reliance has stood for for decades, and, hence, it is more difficult to imagine and digest this metamorphosis.”

If you look at how the business has changed, Reliance Retail has more than 35 million footfalls. Jio has over 250 million customers. The media and entertainment division has more than 700 million users. “RIL has some of the most promising brands and a finger in the wallet of one out of two Indians. As the 4C (connectivity, carriage, content and commerce) converge, a hitherto unseen force multiplier will kick in into the business—the form and shape only left to the imagination,” further notes Kumar.

Reliance has several brands in its fold on the retail and digital side such as Reliance Digital, Reliance Fresh, Reliance Market, Jio, etc. Also, it has businesses in healthcare and education. It is now moving toward an omni-channel market place where it will serve a host of needs of Indian consumers and businesses, including small and medium entrepreneurs.

Reliance has been making investments on a massive scale. In FY2018, it invested Rs 79,253 crore in new capital expenditure on its digital business, petrochemicals, and organised retail. Its new expenditures will soon change how it generates operating profits.

For instance, in FY19, over 25 percent of its EBIDTA margins stemmed from Jio and Retail. In ten years from now, however, in FY 27, its retail, Jio, internet and media businesses will contribute more than 50 percent of its EBIDTA. Mukesh Ambani has targeted operating profits of over Rs 10,000 crore from the new businesses by 2027. Moreover, Kumar of Elara notes that its new businesses will command a valuation of $186 billion in ten years. Kumar also reckons that Ambani will leapfrog into the global league of Jeff Bezos and Jack Ma.

Reliance reckons this year to be its Golden Decade, which will also mark the 50th anniversary of its IPO. “We have made a spectacular start to our Golden Decade. In a world full of volatility, uncertainty, complexity and ambiguity, these achievements are indeed commendable,” said Ambani.

Furthermore, the company has created tremendous shareholder value in the past few years and, if analysts are to be believed, the next five years could be phenomenal for shareholders. “Over the last four decades, Reliance has continued to grow and evolve, creating value by building competitive global scale businesses and delivering increasing shareholder value,” said Ambani. Truly inspirational.