1957, India- a young gentleman returns from Yemen, after a stint with A. Besse & Co. with a dream.
He lays the foundation of a yarn trading business in a small 500 sq. ft. office in Masjid Bunder, Mumbai. Reliance Industries has never looked back since then.
Dhirubhai Ambani’s vision and objectives have shaped the future of the oil-to-textile-to-retail-to-telecom conglomerate-
New Reliance of the New India. Today, RIL has become India’s first Rs. 11 trillion company.
Let’s have a look at the company’s milestones and key deals of this year
The Jio Platforms Limited (JPL)-Facebook Deal
“Certainly, all the products and technology that we’re building to enable that (Jio) partnership are going to be things that we want to do around the world.”- Mark Zuckerberg, CEO, Facebook
Facebook has bought 9.99 per cent stake in Mukesh Ambani’s Reliance Jio for Rs 43,574 crore, making JPL as the fifth largest firm, considering market capitalisation of listed companies in India- Reliance Industries (RIL), TCS, HDFC Bank and Hindustan Unilever (HUL).
Facebook’s investment helped boost the company’s overall value. Shares in RIL jumped more than 8% on the New York Stock Exchange following the April deal.
Within two weeks of the JPL-Facebook deal, JPL bagged four more deals with American private equity giants – Silver Lake, Vista Equity Partners, General Atlantic and KKR – worth a total Rs 78,562 crore.
Soon RIL launched a rights issue to raise Rs 53,125 crore.
Reliance Rights Issue
A rights issue refers to the company’s decision to invite existing shareholders to purchase additional new shares.
Afterwards, JPL signed four more deals with Silver Lake, Vista Equity Partners, General Atlantic and KKR, RIL launched a rights issue to raise an eye-popping Rs 53,124-crore.
The 42,26,26,894 partly paid-up equity shares issue, which was open between May 20 and June 3 received applications worth Rs 84,000 crore and was subscribed 1.59 times, the largest-ever in India and the biggest in the world by a non-financial entity in the last 10 years.
Earlier RIL had announced during the company’s annual general meeting in August last year that it aims to achieve the goal of debt-free company by March 2021, and wiped off its INR 161,035 crore ($21-billion) debt in a timeframe of less than two months.
“The combined capital raised has no precedence globally in such a short time.
Both of these are also unprecedented in Indian corporate history and have set new benchmarks.
This is even more remarkable that this was achieved amidst a global lockdown caused by the Covid-19 pandemic,” RIL said in a statement.
The Jio-BP deal
On May 1, the Indian government approved a deal between BP and RIL, under which the British Oil and gas major will invest in Rs 7,000 crore in RIL’s fuel retail arm, Reliance Petroleum, which was announced in August 2019.
Some part of the fund will be used to set up a country-wide service station network and aviation fuel marketing business, which will operate under the Jio-BP brand.
RIL is also looking ahead to divest the optical fiber investment trust (InvIT).
A paradigm shift – the advent of Reliance Retail & Reliance Jio
Refining and petrochemicals arm contributed for 90 per cent of the group’s cash flow. After venturing out in the digital and retail businesses, there was a significant shift in the cash flow.
RIL’s digital and retail businesses combinedly contributed 35 per cent to the cash flow while Refining and petrochemicals accounted for 60 percent.
RIL took the risk to kick start its retail arm and went into direct competition with retail giants like Kishore Biyanis and Aditya Birla groups.
The same wave was bought in the telecom sector with JIO. Risks were deadly, but they all paid off at the end for both arms.
An investment of INR 4 lakh crore was done by RIL to build Reliance Jio & Reliance Retail.
The heavy backlash from local kiranas and political parties welcomed Reliance Retail in 2006.
After 2015, the brand tasted fruits of success. Reliance retail posted earnings before interest and tax (EBIT) of Rs 8,263 crore in FY20, 49 per cent more than in FY19.
Today, Reliance Retail stands as India’s biggest retailer. Deloitte has ranked Reliance Retail as the fastest-growing retail company in the world.
The retail arm has added over 1,500 stores and launched JioMart, a counterstrike against Amazon and Walmart-owned Flipkart.
After purchasing spectrum rights, RIL forayed into telecoms and digital industries in September 2016, with Reliance Jio Infocomm. FY20 observed 87.65 per cent rise in net profit of Reliance Jio.
It posted a 63.5 per cent rise in EBIT to Rs 14,363 crore and a 40.7 per cent rise in revenue to Rs 68,462 crore.
Jio also added 6.56 million users to its user-base, taking its subscriber base to 387.5 million at the end of March.
The company claims it attracted 100 million subscribers in its first six months and has since amassed 388 million subscribers as of April 2020, according to RIL financial statements.
Alongside, the company is strategizing to reach five crore-plus households for cable networks DEN and Hathway.
“In this new world, data is the new oil. And data is the new wealth,” Mukesh Ambani
In November 2019, RIL brought all its digital initiatives—including Reliance Jio Infocomm—under the new Jio Platforms umbrella.
Vehicle mobility is witnessing a shift towards electric mobility. The change is being carefully observed by RIL.
The steps have been taken to shift the charge from fuel manufacturing/refining to high-margin petrochemicals.
In that direction, RIL has invested about Rs 1 lakh crore to expand petrochemical capacities in Jamnagar, Gujarat. Moreover, Saudi Arabia has agreed to invest Rs 1.14 lakh crore in Reliance O2C Ltd for a 20 per cent stake.
Investing in the future- the 11 deals
While businesses are unable to breathe and falling apart, RIL’s telecoms and digital arm have raised $15.2 billion or INR 115,693.95 Crore in 11 deals over two months.
Let’s have a look at the fundraising done by Jio Platforms
- RIL sold a 10% stake in Jio Platforms to Facebook for $5.7 billion
- Subsequent deals were made with U.S. private equity firms KKR, Vista, General Atlantic, TPG, L Catterton, and Silver Lake (two parts)
- It also secured investment from the United Arab Emirates funds Mubadala and the Abu Dhabi Investment Authority
- Saudi Arabia’s sovereign fund will invest $1.5 billion for a 2.3% stake in the company.
- Afterwards, RIL claimed about being now “net debt-free,” which has been achieved nine months earlier than expected (March 2021)
Recent investment deals have valued Jio Platforms at $65 billion, whereas RIL’s total market capitalization on the Nasdaq is $133 billion.
In the cards
RIL has sold 25% of Jio Platforms and reportedly could consider a deal with either Google or Microsoft. Speculations are, that, both are reportedly vying to buy a 6% share in the company.