Ambani sold a Tech Dream for $ 27 billion. Now He must deliver

Photographer: Prodip Guha / Getty Images

Mukesh Ambani has spent a large part of 2020 convincingly Facebook Inc., Google and a cup of Wall Street heavyweights to buy in its vision for one of the world’s most ambitious corporate transformations.

The richest man in Asia, who is now flushing with $ 27 billion in new capital, is under pressure to deliver.

The 63-year-old Indian tycoon focuses on a handful of priorities as he tries to turn Reliance Industries Ltd., from a former economy conglomerate to a technology and e-commerce titan, according to recent public statements and people familiar with the company’s plans.

This includes developing products for the expected rollout next year of a local 5G network; which includes Facebook’s WhatsApp payment service in Reliance’s digital platform; and integrating the company’s e-commerce offerings with a network of physical mom-and-pop stores across the country. Ambani is also moving forward with plans to launch a interest in Reliance’s oil and petrochemical units, an agreement he originally had hoped he would reduce debt and fund his high-tech hub earlier this year.

Each move

Investors are watching every move by Ambani as it revamped its empire – with a market value of $ 179 billion – amid a pandemic, engaging in highly competitive industries and opponents of Amazon.com Inc. on Walmart Inc. Reliance shares rose 55% this year to an overall high in September, but have since increased profits as stakeholders seek more evidence that Ambani can execute.

“The jury is not available,” said Nandan Nilekani. Infosys Ltd. in 1981 and now serves as chairman of the Bangalore-based software service provider worth about $ 72 billion. “There’s a lot of work to do.”

A spokesperson for Reliance Industries in Mumbai declined to comment on this story.

Ambani’s empire

Asia’s richest man turns to technology and consumer services

Sources: Reliance, data compiled by Bloomberg

While Ambani has publicly embraced his new partnerships with investors including Facebook (he and Mark Zuckerberg have compliments during a live on December 15), the Indian tycoon’s fundraising campaign was initially more than a Plan B. Its original purpose was to sells a 20% stake in Reliance’s oil and petrochemical division Saudi Arabian Oil Co., with a business value of $ 75 billion, implying a $ 15 billion valuation for the stake.

The Aramco agreement, first announced in August 2019, was supposed to help Ambani sign a pledge get rid of his company’s net debt of $ 22 billion in 18 months. But as talks with the Saudis stuck, Reliance investors became more anxious. The stock fell more than 40% in the three months to March 23.

Hit a wall

Ambani, which had started selling interest in its digital services and retail units months earlier, decided to speed up talks after the Aramco deal hit a wall.

One of the people said that the reaction from investors exceeded the expectations of the company, with big name supporters KKR & Co., Silver Lake and Mubadala Investment Co. commit more than $ 20 billion to the digital enterprise and $ 6.4 billion to retail. Confidence released him nine months before his self-imposed deadline in June and the shares of Reliance rose.

At Reliance’s annual shareholders’ meeting in July, Ambani and his eldest children Isha and Akash set out the broad focus of their high-tech ambitions. Among the new services they offered were a 5G wireless network as early as next year and a video streaming platform that would bring Netflix, Disney + Hotstar, Amazon Prime Video and dozens of TV channels under one umbrella.

Reliance’s digital unit, Jio Platforms Ltd., will also develop a portfolio of technology solutions and applications for millions of micro, small and medium enterprises in India, Ambani said, adding that he intends to eventually expand the platform overseas.

The top priority of the people familiar with the matter for 2021 is 5G. While regulators have yet to auction off rights to India’s next-generation airwaves, Ambani said this month that his company would be a pioneer for the 5G revolution in India in the second half of 2021. ‘

$ 54 smartphone

Reliance plans to showcase its range of 5G products during next year’s shareholders’ meeting, which usually takes place between July and September, one of the people said. The company is also is working with Google on an Android-based $ 54 smartphone, part of the strategy to get more Indians to use mobile data for services including streaming video, online games and shopping.

Reliance considers integration with WhatsApps recently approved payment system as an important step in developing its online shopping services, the people said. The businesses work together because Reliance’s e-commerce platforms want to leverage 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, author of ‘The Billionaire Raj: A Journey Through India’s New Gilded Age’.

The industries that Ambani strives for are constantly evolving, far more than the refinery and petrochemical businesses that still make up the bulk of Reliance’s revenue. “He has to get it right again and again,” Crabtree said.

‘Keyman’ risk

There is also the challenge of ‘key man’ risk. Ambani – the face of Reliance – is not getting younger. Although the company has not yet announced a succession plan, the newspaper Mint is from India reported in August that Ambani, whose the net worth is about $ 77 billion, is the establishment of a family council and is aimed at completing succession planning by the end of next year.

“Any large building with one pillar has great inherent risks,” he said. Kavil Ramachandran, executive director of the Thomas Schmidheiny Center for Family Business at the Indian Business School.

Ambani supporters point to his recent history of disruption. He made India’s telecommunications industry famous four years ago by offering free calls and cheap data, and pushed some competitors into bankruptcy. Its wireless service provider, Reliance Jio Infocomm Ltd., now has more than 400 million subscribers.

“Mukesh has been a big part of this wave of innovation,” said Sundar Pichai, CEO of Alphabet Inc., owned by Google. “His vision and focus on a future where every Indian can benefit from the opportunities that technology creates is exciting to us and we are delighted to be a partner in the work.”

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