FISCAL 2022 carried on with the headwinds facing India’s largest company — Reliance Industries (RIL) since Covid struck in 2020. If the first wave of the pandemic hurt the company most in FY21, the second and third waves, followed by the Russia-Ukraine conflict affected the Mukesh Ambani-led conglomerate in FY22. Crude prices, which averaged $75 a barrel during April ‘21 to January ‘22, vaulted to $100 a barrel during February-June 2022. To counter volatility, RIL changed gears, cashing in on the economic recovery at home, ramping up its consumer business and enhancing natural gas production.

The company posted a net profit of ₹60,705 crore in FY22 — a 23.56% rise year-on-year — on a revenue of ₹7,39,518 crore, a 43.81% increase. Consolidated EBITDA for the year grew 69.90% to ₹1,10,424 crore. The growth was led by a 38.1% increase in the oil-to-chemicals (O2C) business on the back of a recovery in demand and fuel margins, followed by digital services — 20.9% rise due to high average revenue per user and tariff revision — and retail, a 26.5% increase due to higher footfalls, store expansion and traction in omni-channel offerings. The oil & gas exploration and production (E&P) segment saw EBITDA growing 20 times due to successful commissioning and ramp-up of production from new fields.

In the first half of FY23, RIL reported a 19.4% increase in net profit to ₹34,955 crore, and a 41.7% surge in revenue to ₹496,479 crore.

What Next?

In its Q2 assessment report, Citi Research says the softness in refining margins, windfall tax on product exports, and weakness in petrochemicals business could cap RIL’s near-term O2C earnings, with potential downsides in a hard-landing scenario. “Domestic consumer-facing segments of telecom and retail should, however, continue to deliver steady performance, while oil and gas (production from KG basin) earnings should benefit from higher prices and production,” it added.

The company has already lined up its new round of investment, around ₹3.5 lakh crore, to build the 5G ecosystem, four Giga factories for the solar energy business, and for ramping up retail and FMCG and petrochemicals businesses. It plans to foray into end-to-end financial services business through Jio Financial Services.

New Investment Cycle

The volatile environment notwithstanding, Ambani raised ₹2.92 lakh crore in FY21. But with Covid posing its own set of challenges globally, he had little leeway to plan the capital deployment and find opportunities in emerging businesses. Ambani’s core team, including confidantes Manoj Modi, Pankaj Pawar, RIL CFO Alok Agarwal and joint CFO V. Srikanth, besides his twin children — Isha and Akash — would often huddle together on JioMeet to discuss investment plans, according to company insiders.

After flicking through tomes to understand global trends, Ambani spotted the next big opportunity in solar power, as countries world over set their sights on carbon neutrality. He wanted RIL to become the first integrated player in the solar value chain, starting with the manufacture of polysilicon to photovoltaic cells and finally, storage solutions. Most solar panels sold currently in India come with polysilicon manufactured in China.

“We started everything with the discussion on energy transition in late 2019. We were clear that our focus should be on manufacturing and chemical technology as these two are our core strengths,” says an executive.

Ambani allocated ₹75,000 crore to build four Giga factories at the Dhirubhai Ambani Green Energy Complex in Jamnagar, with an aim to create 100GW of solar energy by 2030. The renewable investments will also set off RIL’s carbon footprint from petroleum and petrochemical business. In the recently held annual general meeting (AGM), he announced the company will turn net carbon zero by 2035.

“We are not planning carbon emission reduction as a separate initiative with a target date. Once all projects start running, we will turn net carbon zero before 2035,” says the executive.

By 2019, Ambani was convinced about the diminishing importance of fossil fuels. He had planned to convert 70% of the output from Jamnagar refinery and petrochemical complex to chemicals. Today, 90% of its production is fuels — primarily petrol, diesel, naphtha, kerosene and LPG, while the remaining 10% is chemicals. Ambani has allocated another ₹75,000 crore to expand petrochemical capacities over the next five years.

The end-to-end strategy was also applied to other key businesses of RIL — retail and telecom, besides hydrocarbons and petrochemicals. Jio recently launched 5G services in Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Varanasi and Nathdwara (Rajasthan). It plans to cover the entire country by December 2023.

“We have indigenously developed an end-to-end 5G stack which is fully Cloud-native, software-defined and digitally managed, with support for even advanced features like quantum security,” Ambani said at the AGM. Jio will deploy the latest version of 5G, also known as standalone 5G, which has zero dependencies on 4G network, said Ambani. “With standalone 5G, Jio can deliver services such as low latency connectivity, machine-to-machine communication, 5G voice, Edge computing and network slicing, and metaverse,” he added. At the recently concluded spectrum auction, Jio acquired the largest wireless spectrum for 5G, which includes 700MHz, 800MHz, 1,800MHz, 3,300MHz, and 26GHz bands aggregating ₹88,078 crore.

On the retail front, the company is the largest in the country with 16,617 physical stores in operation. The e-commerce platform, JioMart, which works on a hyperlocal model, delivers to over 260 towns. It has onboarded around two million merchants.

But Ambani’s retail plans don’t end there. Isha Ambani, director, Reliance Retail, announced at the AGM that the company will enter the FMCG business. RIL spent $4 billion in FY22 to expand logistics, tying up with local merchants for last-mile delivery and acquiring capabilities and brands.

For the financial services business, RIL has started the process of demerging Jio Financial Services (JFS) and listing it as a separate entity. JFS plans to foray into consumer and merchant lending, asset management and insurance, besides developing a fintech platform.

Global Tie-ups

To execute his plan, Ambani has roped in global biggies such as Facebook and Google. RIL is working with Mark Zukerberg’s Meta, which is also an investor in Jio Platforms Ltd. (JPL), to take immersive technology to the masses. It has also tied up with Google to develop ultra-affordable 5G smartphones. Another partnership with Microsoft is meant to expand the Azure ecosystem in India, and develop Cloud-enabled business solutions, especially for small and medium businesses. With Intel, the company is working on technologies used in Jio’s Cloud-scale data centres and 5G Edge locations, as well as in infrastructure for applications like Artificial Intelligence. Other tie-ups include with Ericsson, Nokia, Samsung and Cisco.

Another partnership in the works is with Qualcomm, also one of the investors in Jio Platforms. At the RIL AGM, Qualcomm CEO Cristiano Amon hinted at collaborations in drones, robotics and private networks.

In line with telecom, the retail business also acquired assets and tied up with global brands to enhance its portfolio. Reliance Retail, modelled on Walmart and Tesco, jumped on the acquisition bandwagon with Hamleys in 2019. It continued its shopping spree in 2020 and 2021 with acquisitions of Netmeds, Urban Ladder, Zivame, Just Dial, Portico, Dunzo and Milk Basket. It is also said to be in talks to acquire German retailer Metro AG’s cash and carry business in India in a deal estimated at around ₹4,000 crore, besides being in the race to buy the assets of Future Retail through the bankruptcy process. In the fashion and lifestyle portfolio, Reliance Retail recently picked up sizeable stakes in brands, including Ritu Kumar and Manish Malhotra. It also signed a master franchise agreement with Texas-based convenience stores chain 7-Eleven.

For the four Giga factories — for manufacture of solar photovoltaic cells, green hydrogen, batteries and fuel cells — RIL has bought assets globally to bridge its knowledge gap. The newly floated Reliance New Energy Solar Ltd. (RNESL) acquired Norway-based REC Solar Holdings AS for ₹5,782 crore to acquire the technology to manufacture polysilicon. The 25-year-old company has three manufacturing facilities —two in Norway for making solar-grade polysilicon and one in Singapore, for making PV cells and modules. “Our 10GW solar PV cell and module factory at Jamnagar, based on REC technology, will commence production by 2024. We are targeting to scale up to 20GW annual capacity in a phased manner by 2026,” Ambani said at the AGM.

RIL plans to start production of battery packs by 2023 and scale up to a fully integrated 5 GWh annual cell-to-pack manufacturing facility by 2024, and to 50 GWh by 2027.

In 2021, RNESL acquired a 40% stake in Sterling & Wilson Solar Ltd., a leading global engineering, procurement and construction (EPC) and operation and maintenance (O&M) company in the renewables sector, for ₹2,850 crore. In December last year, it bought UK-based Faradion, a battery company, for $135 million. It has also announced investment worth ₹337 crore in German firm NexWafe for access to technologies for manufacturing solar wafers. A $50 million investment has also been announced in U.S.-based energy storage firm Ambri, and another $32 million for a 79.4% stake in the U.S.-based developer of software management tools for solar energy generation, SenseHawk.

Leadership Transition

At the AGM, Ambani said the next-gen is taking over the reins across businesses. Akash and Isha have assumed leadership roles in Jio and Retail, respectively. “They have been passionately involved in our consumer businesses since inception,” Ambani said.

Younger sibling Anant has also joined the new energy business. “In fact, he is spending most of his time in Jamnagar,” said Ambani. “They are the first among equals in a young team of leaders who are already doing amazing things at Reliance. All of them are being mentored on a daily basis by senior leaders, including myself and the board of directors,” said Ambani.

Evolution seems to be the only constant in Ambani’s empire.

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