Plans are afoot at Reliance Industries Ltd ( RIL) to expand its financial services play, some details of which may be shared by chairman Mukesh Ambani at the company’s annual general meeting (AGM) on 15 July.
RIL will initially add non-banking services, including insurance broking and mutual fund products, on the Jio platform, which already caters to its telecom and e-commerce businesses, according to three people aware of the company’s plans. Jio’s anchor customer base of 387.5 million and Reliance Retail’s 11,784 stores, could provide a strong distribution channel for its financial products.
JioMoney is already live on various platforms. RIL also holds a 70% stake in Jio Payments Bank, a joint venture with the State Bank of India, which is awaiting a formal launch.
“RIL has been successfully integrating and cross-pollinating strengths between its digital and retail services to increase its reach. Now, with the financial services portfolio being added, and with surplus liquidity available, we expect its consumer business growth to further pick up pace," said HSBC global research in its report on 29 June.
RIL is also banking on startup accelerator JioGenNext, which along with the National Payments Corp. of India (NPCI) and Jio Payments Bank, plans to collaborate with fintech startups to improve existing payment-related problems and build feasible solutions based on the Unified Payments Interface (UPI) 2.0.
At present, RIL’s financial services business, reported a turnover of ₹1,271 crore and an earnings before interest and taxes (Ebit) of ₹473 crore last fiscal year, contributing 0.5% to its consolidated Ebitda (earnings before interest, depreciation and amortisation).
This, however, will not be RIL’s first attempt to have a bigger play in the financial services segment. After Mukesh Ambani reconciled with his younger brother Anil Ambani in 2010 and scrapped the “non-compete" agreement, it paved the way for either group to enter sectors that had earlier been reserved for RIL. Subsequently, in 2011, RIL announced a 50:50 joint venture with global private equity and hedge fund DE Shaw to build a financial services business in India. It was, however, called off in 2018.
“Integration of digital services, retail, and financial services would make RIL a formidable player in the Indian retail space. With the three segments working in tandem, RIL’s consumer business will gather steam in the coming years," said an analyst with a domestic brokerage.
Since the last AGM, RIL has completed a strategic stake sale in Jio Platforms and petro-retail and moved to zero net debt. According to its annual report, work is on to complete the 20% stake sale in its oil-to-chemicals business to Saudi Aramco.
RIL’s consumer businesses, retail and Jio, now account for 35% of its consolidated segment earnings before interest, taxes, depreciation, and amortization (Ebitda). In FY20, the consumer businesses collectively grew by 49.3% year-on-year of the consolidated Ebitda. Its consolidated Ebitda crossed the ₹100,000 crore-mark, a first by an Indian company. RIL’s diversified earnings streams and conservative balance sheet place it in an advantageous position to face the ongoing macro challenges and it is committed to its investment plans in the consumer businesses and new initiatives, according to Mukesh Ambani.
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