Mukesh Ambani spent much of 2020 convincing Facebook Inc., Google and a clutch of Wall Road heavyweights to shop for into his vision for one of the crucial world’s most ambitious corporate transformations.
Now flush with $27 billion in fresh capital, Asia’s richest man is under pressure to deliver.
The 63-year-old Indian tycoon is focused on a handful of priorities as he tries to turn Reliance Industries Ltd. from an old-economy conglomerate into a technology and e-commerce titan, according to recent public statements and people familiar with the company’s plans.
These include developing products for the anticipated roll-out next year of a native 5G network; incorporating Facebook’s WhatsApp payments service into Reliance’s digital platform; and integrating the company’s e-commerce offerings with a network of physical mom-and-pop shops across the country. Ambani may be pushing forward with plans to sell a stake in Reliance’s oil and petrochemical units, a deal he had originally hoped would minimize debt and finance his high-tech pivot earlier this year.
Investors are watching Ambani’s each move as he overhauls his empire — with a market value of $179 billion — in the course of a pandemic, wading into highly competitive industries and taking on rivals from Amazon.com Inc. to Walmart Inc. Reliance shares rose as much as 55% this year to an all-time high in September, but they’ve since pared gains as stakeholders look for more evidence that Ambani can implement.
“The jury is out,” said Nandan Nilekani, who co-founded Infosys Ltd. in 1981 and now serves as chairman of the Bangalore-based software products and services provider valued at approximately $72 billion. “There’s a large number of work to be done.”
A spokesman for Mumbai-based Reliance Industries declined to remark for this story.
While Ambani has publicly embraced his new partnerships with investors including Facebook (he and Mark Zuckerberg traded compliments all over a livestreamed conversation on Dec. 15), the Indian tycoon’s fundraising spree used to be to start with meant to be more of a Plan B. His original goal used to be to sell a 20% stake in Reliance’s oil and petrochemicals division to Saudi Arabian Oil Co., at an enterprise value of $75 billion, implying a $15 billion valuation for the stake.
The Aramco deal, first announced in August 2019, used to be supposed to help Ambani deliver on a pledge to eliminate his company’s $22 billion in net debt in 18 months. But as talks with the Saudis stalled, Reliance investors grew more anxious. The inventory tumbled more than 40% in the three months through March 23.
Ambani, who had begun exploring stake sales in his digital products and services and retail units months earlier, made up our minds to accelerate those talks after the Aramco deal hit a wall, people familiar with the matter said.
The response from investors exceeded the company’s expectations, one of the crucial people said, with big-name backers including KKR & Co., Silver Lake and Mubadala Investment Co. committing more than $20 billion to the digital trade and $6.4 billion to retail. Reliance declared itself free of net debt in June, nine months before its self-imposed deadline and Reliance’s shares surged.
At Reliance’s annual shareholder assembly in July, Ambani and his eldest children Isha and Akash sketched out the broad thrust of their high-tech ambitions. A few of the new products and services they touted used to be a 5G wireless network as early as next year and a video-streaming platform that will bring Netflix, Disney+ Hotstar, Amazon Prime Video and dozens of TV channels under one umbrella.
Pichai urged the U.S. and European Union to coordinate regulatory approaches on man made intelligence, calling their alignment “critical.”
Reliance’s digital unit, Jio Platforms Ltd., will also develop a portfolio of technology solutions and apps for India’s millions of micro, small and medium businesses, Ambani said, adding that he plans to eventually expand the platform out of the country.
The company’s biggest precedence for 2021 is 5G, people familiar with the matter said. While regulators have yet to auction rights to India’s next-generation airwaves, Ambani said this month that his company “will pioneer the 5G revolution in India in the second one half of 2021.”
Advertisements for Jio Platforms Ltd., the mobile network of Reliance Industries Ltd., are displayed at Marine Drive in Mumbai, India, on Tuesday, July 14, 2020. Google is in advanced talks to shop for a $4 billion stake in Jio, the digital arm of Indian billionaire Mukesh Ambani’s conglomerate, people familiar with the matter said, seeking to sign up for rival Facebook Inc. in chasing growth in a promising internet and e-commerce market.
Reliance is planning to showcase its lineup of 5G products at next year’s shareholder assembly, which most often takes place sometime between July and September, one of the crucial people said. The company may be working with Google on an Android-based $54 smartphone, a part of the strategy to receive more Indians to use mobile data for products and services including streaming video, online games and shopping.
Reliance views the integration with WhatsApp’s recently approved payments system as a a very powerful step in the development of its online shopping products and services, the people said. The companies are working together as Reliance’s e-commerce platforms look to tap hundreds of millions of Facebook, WhatsApp and Instagram users.
Ambani’s biggest challenge now is to earn a return on these investments, said James Crabtree, creator of “The Billionaire Raj: A Journey Through India’s New Gilded Age.”
The industries Ambani is targeting are constantly evolving, a lot more so than the refining and petrochemicals businesses that still comprise the bulk of Reliance’s revenue. “He’s got to receive it correct again and again,” Crabtree said.
There’s also the challenge of “key man” risk. Ambani — the face of Reliance — isn’t getting any younger. While the company hasn’t publicly disclosed a succession plan, India’s Mint newspaper reported in August that Ambani, whose net worth is approximately $77 billion, is setting up a circle of relatives council and aims to total succession planning by the end of next year.
“Any large, single-pillar edifice has major inherent risks,” said Kavil Ramachandran, executive director of the Thomas Schmidheiny Centre for Circle of relatives Enterprise at the Indian School of Commerce.
Ambani supporters point to his recent track record of disruption. He famously upended India’s telecommunications industry four years ago by offering free calls and cheap data, pushing some rivals out of business. His wireless carrier, Reliance Jio Infocomm Ltd., now has more than 400 million subscribers.
Sundar Pichai, chief executive officer of Alphabet Inc., gestures while speaking all over a discussion on man made intelligence at the Bruegel European economic think tank in Brussels, Belgium, on Monday, Jan. 20, 2020. Pichai urged the U.S. and European Union to coordinate regulatory approaches on man made intelligence, calling their alignment “critical.”
“Mukesh has been a big a part of this wave of innovation,” said Sundar Pichai, chief executive officer of Alphabet Inc., which owns Google. “His vision and focus of a future where each Indian can take pleasure in the opportunities technology creates is in reality exciting to us and we are glad to be a partner in that work.”
Ambani has also positioned his empire as a potential asset for an Indian government that’s eager for ways to counter the growing technological might of China, particularly after lethal border clashes between the long-time rivals this year. Ambani has repeatedly highlighted how Reliance’s goals align with those of Prime Minister Narendra Modi’s government, which has called for homegrown solutions to bridge the country’s yawning digital divide.
While Infosys’s Nilekani cautions that it’s too early to declare Reliance’s transformation a success, he’s optimistic that Ambani will pull it off.
“He has a terrific eye for execution,” Nilekani said. “He looks at the big picture while at the same time getting into each minor detail, much like Jeff Bezos. They’re both unique. Neither man is known to surrender.”