Disrupt And Grow
Gennexthub, the latest initiative by Reliance Industries (RIL), supports young entrepreneurs realise their dreams and has the potential to bring the much needed scale in India’s startup ecosystem. RIL , as an enabler as well as a client, is expected to lift the enthusiasm among the young entrepreneurial aspirants to a significantly higher level, ultimately targeting an inclusive growth model.
While this could provide an instant boost to the country’s economy both in terms of number of sustainable new generation enterprises and new job creation, it also opens up avenues of investment for a large and resourceful group like Reliance. And, more importantly, this initiative also indicates that the Mukesh Ambani-led corporate giant can again create disruptions in many more market segments in the near future.
With a consolidated turnover of $50.9 billion (Rs 330,180 crore), RIL is again on top of the BW Real 500 corporate list in 2016-17 in terms of income and assets. RIL’s fresh move in its already established retail space is again towards another disruption. Reliance Retail, is exploring a business-to-business play by entering into distribution of apparel, FMCG and white goods directly to other retail outlets such as neighbourhood shops and small retailers. The idea is to tap a larger share of the market looking at the scope of an exponential growth in organised retail, which is currently just 8 per cent of the total market.
During 2016-17, Reliance delivered record operational and financial performance, which has taken the company to the top rank. This scale of performance resulted in a year-to-year growth of 18.8 per cent in net profit at $4.6 billion (Rs 29,901 crore) during the year. “The most significant factors affecting year-to-year comparisons of earnings and cash flow generated by our operating activities are improvement in the petrochemicals and refining margins,” confirmed RIL CMD Mukesh Ambani in his annual address to shareholders.
Industry analysts predict that this trend will continue and Reliance will sustain the same refining margin for another two years. “While we continue to believe capacity addition would remain strong, especially in low cost condensate splitters, utilisation of the Latin American refineries does not appear to be improving any time soon. This would enable RIL to continue clocking GRM of ~$11.5/bbl till 2020,” says Swarnendu Bhushan, research analyst with Motilal Oswal, a leading brokerage firm.
While, Reliance Jio’s revised plans are priced around 15 per cent higher, with an average ARPU of Rs 150 for its popular unlimited price plans, we expect actions towards ARPU accretion to drive ARPU of Rs 156 in 2018 and Rs 172 in 2019, Motilal Oswal analysts wrote in their latest report.
Increasing domestic demand for oil also had a key role in boosting the revenue and margins for Reliance this time. India’s oil demand grew 5.2 per cent during the year led by strong growth in gasoline and jet fuel. Though diesel and petrochemical demand growth in India remained muted or lower compared to the previous year as industrial cycle lagged consumption, the demand for polymer and polyester in India was up 7 per cent and by 3 per cent, respectively in the year 2016-17.
