Reliance Industries: The 800-Pound Gorilla
The next generation was in full flow at the recently held annual general meeting of Reliance Industries (RIL). While the company CMD Mukesh Ambani waxed eloquent about changing the lives of 50 crore Indian consumers who use feature phones, his children made it clear that they are leading the multi-billion dollar digital gamble of the company. Of course, even as RIL pushes ahead with its grand ambitions of becoming the digital behemoth of India, energy will continue to drive the company’s growth and profits for years to come. ‘Think big’ comes automatically to mind when you think of Reliance.
Certainly, this is the key element that puts RIL again on the top slot of BW Businessworld’s Most Respected Companies survey in 2017. The company that was ranked second among the energy heavyweights, chosen on the basis of financials, innovation, investor return, people management and best practices and ethics among others, has been making record investments in its core business sector, that is, oil and gas simultaneously.
“Our new projects in the hydrocarbons and digital services businesses have made significant progress,” said Ambani in his letter to the shareholders.
The latest decision to invest in entertainment also demonstrates the group’s vision to expand its reach further into diversified but complementary areas consolidating its position in the consumer facing businesses.
Reliance announced on 20 July that it has decided to invest in Balaji Telefilms to acquire 24.92 per cent equity in the entertainment company, through subscription to preferential issue amounting to Rs 413.28 crore.
This investment in content production (including digital content) is in line with RIL’s commitment to invest and grow in telecom, digital and media businesses. Balaji Telefilms recently launched a new digital, entertainment platform, ALTBalaji in April. The platform has garnered over 3 million downloads and subscribers from over 75 countries since its launch.
In 2016, RIL has invested at least Rs 1,12,000 crore ($17 billion) across all its businesses to create sustained and significant value for its stakeholders, according to Ambani. This was the highest-ever investment by any corporate in Indian history.
“As we near the end of our largest capital expenditure cycle, we are focused on ensuring a smooth startup and stabilisation of the new growth platforms across our hydrocarbon and consumer businesses,” he stated in the annual report.
Of course, RIL sees the downside of investing in the oil sector. Ambani, who recently said that the group sees data as the new oil of the world, which can determine the moves in the economy, observes the gloomy trend that the industry witnessed the previous year saying that “the global economic activity remained muted during the year as oil prices remained soft”. The oversupply situation continued as oil producing countries vied for market share.
However, RIL recorded its highest-ever consolidated net profit of Rs 27,630 crore ($4.2 billion) during the year 2015-16, a growth of 17.2 per cent. According to the company, strong operating performance from the refining and petrochemicals business led to higher operating profits, which increased by 14.2 per cent to Rs 52,503 crore ($7.9 billion).
Ambani, who predicts a fourth industrial revolution that is gripping the world as it is quite visible by the convergence of physical, digital and biological sciences, said recently at an industrial forum, “I believe we are on the verge of exponential change, where we have the opportunity to solve large problems in a short span of time.”
