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

Photographer: Prodip Guha / Getty Images

Mukesh Ambani spent much of 2020 convincingly Facebook Inc., Google and a number of Wall Street heavyweights to buy into its vision for one of the world’s most ambitious business transformations.

Now equated with $ 27 billion in fresh capital, Asia’s richest man is under pressure to perform.

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

These include developing products for next year’s anticipated rollout of a local 5G network; with WhatsApp from Facebook payment service in the Reliance digital platform; and integrating the company’s e-commerce offering with a network of brick-and-mortar mom-and-pop stores across the country. Ambani is also moving forward with plans to have one share in Reliance’s oil and petrochemical units, a deal he originally had hoped he would cut debt earlier this year and fund his high-tech hub.

Every move

Investors follow Ambani’s every move as he overhauls his empire – with a market value of $ 179 billion – in the midst of a pandemic, venturing into highly competitive industries, and rivals the Amazon.com Inc. to The shares of Walmart Inc. Reliance were up a whopping 55% this year to a record high in September, but they’ve since scaled back profits as stakeholders look for more evidence that Ambani can execute.

“The jury is out,” said Nandan Nilekani, who was a co-founder Infosys Ltd. in 1981 and is now chairman of the Bangalore-based software vendor worth approximately $ 72 billion. “There is a lot of work to be done.”

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

Ambani’s Empire

Asia’s Richest Man is all about technical and consumer services

Sources: Reliance, Data Collected by Bloomberg

While Ambani has publicly embraced his new partnerships with investors, including Facebook (he and Mark Zuckerberg exchanged compliments during a live stream conversation on December 15), the Indian tycoon’s fundraiser was initially more of a plan B. His original goal was to to sell a 20% stake in Reliance’s oil and petrochemical business Saudi Arabian Oil Co., with an enterprise value of $ 75 billion, implying a $ 15 billion valuation for the stake.

First announced in August 2019, the Aramco deal was to help Ambani deliver on its promise lose his company’s $ 22 billion in net debt in 18 months. But like conversations with the Saudis Stuck, Reliance investors became more anxious. The stock tumbled more than 40% in the three months to March 23.

Hit a wall

Ambani, who had begun investigating stock sales in its digital services and retail units months earlier, decided to speed up those discussions after the Aramco deal hit a wall, people familiar with the matter said.

Investors’ response exceeded the company’s expectations, one of the people said, including major sponsors KKR & Co., Silver Lake and Mubadala Investment Co. spends more than $ 20 billion on the digital business and $ 6.4 billion on retail. Trust declared itself free of net debt in June, nine months before the self-imposed deadline, and Reliance’s stock skyrocketed.

At Reliance’s annual shareholders meeting in July, Ambani and his eldest children Isha and Akash outlined the breadth of their high-tech ambitions. Among the new services they offered was 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.

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

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

Smartphone from $ 54

Reliance plans to showcase its lineup of 5G products at next year’s shareholder meeting, which usually takes place sometime between July and September, one said. The company is too working with Google on a $ 54 Android-based smartphone, part of the strategy to get more Indians to use mobile data for services such as streaming video, online games and shopping.

Reliance recently looked at integration with WhatsApps approved payment system as a critical step in the development of its online shopping services, the people said. The companies are teaming up as Reliance’s ecommerce platforms aim to tap into hundreds of millions of Facebook, WhatsApp and Instagram users.

Ambani’s biggest challenge now is to make a return on these investments, said James Crabtree, author of “The Billionaire Raj: A Journey Through India’s New Gilded Age.”

The industries Ambani focuses on are constantly evolving, much more so than the refining and petrochemical companies that still make up the bulk of Reliance’s revenues. “He has to do it right again and again,” Crabtree said.

Key Man Risk

There is also the challenge of “key” risk. Ambani – the face of Reliance – is not getting any younger. While the company has not yet disclosed a succession plan, India’s Mint newspaper states reported in August that Ambani, whose Net worth is approximately $ 77 billion, establishes a family council and aims to complete succession planning by the end of next year.

“Any large single-pillar building has great inherent risks,” he said Kavil Ramachandran, Executive Director of the Thomas Schmidheiny Center for Family Enterprise at the Indian School of Business.

Ambani supporters point to his recent track record of disruption. He turned India’s famous telecommunications industry upside down four years ago by offering free calls and cheap data, bankrupting some rivals. Its wireless provider, Reliance Jio Infocomm Ltd., now has more than 400 million subscribers.

“Mukesh has been a big part of this innovation wave,” said Sundar Pichai, CEO of Alphabet Inc., owner of Google. “His vision and focus on a future where every Indian can take advantage of the opportunities offered by technology is really exciting for us and we are happy to be a partner in that work.”

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