It is hard to match Reliance Industries Limited (RIL) in sheer ambition and in its ability to wheel around a gigantic enterprise and re-imagine it. It was no surprise therefore that RIL unveiled a Rs 2.75 trillion capex plan, at its 45th AGM on Monday, with much of the investment focused on verticals like telecom and O2C. Even as it builds on the existing portfolio, RIL has opted to foray into a clutch of promising areas such as green energy and new energy. It can afford to, given its strong balance sheet and businesses that are spewing cash. At the end of March 2022, the effective net debt on the balance sheet was less than Rs 90,000 crore while the EBITDA was Rs 1.1 trillion. The management believes the returns from the capex would be good enough to take the market value of the conglomerate to twice the current levels of Rs 17.5 trillion in the next five years. While there is definitely promise in businesses like telecom, where RIL will be rolling out 5G services this October, and retail where it is already the country’s biggest player, achieving a market cap of Rs 35 trillion does seem a daunting task. But then, RIL’s market value today is more than three times what it was in August 2017, or roughly five years ago.
Having completely disrupted the country’s telecom sector with the launch of RJio in September 2016, and notching up 400-million-plus mobile phone subscribers, RIL is now targetting a pan-India 5G rollout by December 2023. Armed with spectrum in the 700 Mhz band, the strategy is to deploy the latest version of stand-alone 5G and not rely on the existing 4G network. There is also the plan to connect over 100 million homes, millions of small and medium enterprises and enable billions of sensors to develop home, enterprise and IoT (internet of things) solutions. While Jio’s share of the wireless subscriber market may go up to just about 40% by March 2025 from 35% currently, the business is set to become much more profitable with the wireless ARPUs (average revenue per user) estimated to jump to nearly Rs 245/month. That is expected to drive up the net profits of RJio three-fold.
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The gameplan for Reliance Retail seems to be to continue to roll out a big portfolio of private brands across categories and at affordable prices, with the aim of capturing volumes and earning better margins. The play in the FMCG space would probably see JioMart compete with regional brands in the food and beverages segment. One key plank of the strategy seems to be to make the shopping experience a good one by giving the 400 million users of WhatsApp access to JioMart. In general, RIL’s e-commerce initiatives have fared well with the onboarding of two million partners. The longer-term goal is to team up with 10 million merchants in as many as 7,500 towns. While the competitive intensity in the retail space is very high, the pace at which Reliance Retail has managed to scale up the business in a matter of a few years is truly commendable. With online shopping expected to catch on, doubling the turnover in the next 3-4 years should be easy, but making it profitable, less so. RIL’s ability to access both capital and talent has always put it ahead of the competition. That’s unlikely to change.