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Reliance AGM: Ambani bets on solar energy, ultra-cheap smartphones and new commerce

Retail, technology and solar energy will fuel RIL's next few decades

reliance-digital-jio-phone-store-reuters FILE PHOTO: A Jio mobile phone is on display inside a digital store of Reliance Industries Ltd, Mumbai, India, October 7, 2020 | REUTERS/Niharika Kulkarni/File Photo

Reliance’s annual general meetings in the past few years have been the stage for some big bang announcements, be it the announcement of the Jio telecom service, the launch of the effectively-free (at the time) Jio Phone, the rollout of JioFiber broadband in 2019 or the investment from Google last year. This year the shadow of the COVID-19 pandemic was clearly visible on the proceedings. 

Much of the initial part of the AGM was dedicated to the pandemic and how RIL had stepped in to help, be it setting up a dedicated COVID-19 hospital in just a few days of the first wave or repurposing its manufacturing to supply medical-grade oxygen when the nation faced an acute crisis in the second wave, among many other things.

But, as we look beyond the pandemic, RIL has set clear sights on programmes and partnerships that will usher in a new era for the company. If textile, petrochemicals and oil and gas were the pillars of RIL’s growth over the past few decades, retail, technology and solar energy are set to fuel RIL’s next few decades. Shareholders of RIL were expecting updates on some of the major announcements the company had made in previous AGMs, while also expecting something that will give a clear forward direction. Mukesh Ambani’s speech on Thursday had it all.

In 2019, Reliance had announced Saudi Aramco would be acquiring a 20 per cent stake in the oil-to-chemical business. But, as the COVID-19 pandemic hit worldwide and oil prices went into a tailspin in 2020, negotiations seemed to have stalled.

On Thursday, Mukesh Ambani said there has been “substantial progress” in the discussions in the past year.

“This continued engagement and resolve from both sides, even during this pandemic, is a testimony of strong relationship between Saudi Aramco and Reliance. I expect our partnership to be formalised in an expeditious manner during this year, after obtaining required regulatory clearances,” said Ambani.

He said there was a spirit of mutual commitment to convert their long-standing relationship into a perpetual partnership. Inducting Yasir Al-Rumayyan, the chairman of Saudi Aramco on the board as an independent director, will perhaps go a long way in cementing this partnership. As such the knowledge and insights of Al-Rumayyan, who is also the governor of Saudi Arabia’s Public Investment Fund,  should be advantageous for RIL, which is hiving off the oil-to-chemicals (O2C) business into a separate unit.

Ambani also mentioned that his joining the board was the beginning of the internationalisation of Reliance. But, what that means and how it pans will have to be watched out for. And as Ambani said, we can expect to hear more on this in the “times to come.”

In the last AGM, Ambani had disclosed plans to transform into a new energy business. When RIL typically enters into a new business area, it will throw all its might behind it. This AGM, Ambani laid out a clear road map of RIL’s intentions in the new energy business, particularly in the area of solar energy. He’s announced a massive Rs 75,000 crore investment in this area, which will include four giga-factories that will manufacture and integrate all the critical components of the new energy ecosystem. Ambani, perhaps has, Elon Musk and Gautam Adani, who are also betting big on renewable energy, in his sights. 

RIL not just wants to set up factories, but also offer end-to-end solutions to global renewable energy projects and will set up a project management and construction division for the same. A project finance division that provides finance solution to stakeholders is also on the cards.

VK Vijayakumar, the chief investment strategist at Geojit Financial Services says the launch of the clean energy ecosystem was clearly the highlight of the 44th AGM of RIL. 

As countries and conglomerates around the world try to lower their appetite for fossil fuels and announce major steps towards a more sustainable future, RIL’s new energy push is indeed timely and could certainly be a big game-changer for it. 

The other game-changer could be an ultra-affordable Android smartphone. Currently, India’s smartphone market, especially in the entry-level and budget end, is dominated by Chinese companies. In the last few years, Reliance has launched 4G Jio feature phones and expanding into a proper smartphone that would be pocket friendly for the masses was an obvious next step. 

RIL’s partnership with Google (the US tech giant invested Rs 33,737 crore to pick up 7.7 per cent stake in Jio Platforms last year) will be extremely beneficial here.

The JioPhone Next will be powered by an extremely optimised version of the Android operating system that has been jointly developed by Jio and Google, especially for the Indian market. This could make the company’s phones stand out, while also helping drive smartphone penetration in the country massively. 

The partnership with Google will not just end there but also expand to the tech giant’s cloud solutions that should power Jio’s 5G services when they are launched and also benefit its other platforms like JioMart, JioSaavn and JioHealth. 

Jio had recently received regulatory approvals as well as trial spectrum for initiating 5G trials. Ambani noted that the entire 5G standalone network has been installed in the company’s data centres across the nation and also at trial sites in Navi Mumbai.

As Ambani put it, “Jio is not just working to make India 2G-Mukt, but also 5G-Yukt.”

“The announcement of an ultra-affordable smartphone jointly developed by RIL and Google to be launched in September has the potential to accelerate India’s digitisation drive. RIL’s plan to substantially scale up clean energy and digital technology has the potential to transform RIL into a leading global company in sync with a sustainable planet,” said Vijayakumar. 

Another area where RIL is expected to gain massively from partnerships is in retail and e-commerce. Last year, social networking giant Facebook had announced a massive Rs 43,574 crore investment in Jio Platforms. Last year, Reliance Retail also launched JioMart, its e-commerce service that aimed to connect neighbourhood grocery stores to customers. 

An initial set of integration between WhatsApp (the messaging platform owned by Facebook) and JioMart has now been launched on a trial basis and the response from customers is encouraging, said Ambani.

Reliance is already the largest retailer in the country. Even amid the pandemic, it added 1,500 stores last year, taking its total store count to 12,711 outlets. In recent years, as the retail business has scaled up, the contribution of the consumer-facing businesses to RIL’s topline and bottom-line has increased significantly. They already contribute half of its EBITDA (earnings before interest, taxes, depreciation and amortization). 

JioMart registered over 6.5 lakh peak orders in a single day, said Ambani. The integration with WhatsApp undoubtedly has the potential to give it massive traction.

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