RIL AGM 2020: The Elephant Can Dance! A Front-row Shareholder View
I must be amongst the four lakh shareholders who attended the 43rd Reliance Industries Limited (RIL) AGM on 15th July 2020. Luckily, I got a front-row seat at the proceedings. Perhaps as good a view that a Nita Ambani or Sachin Tendulkar or Amitabh Bacchan would have got otherwise. Now that’s big deal for a marginal shareholder like me. Technology made it possible of course but it still feels good to put it this way. Considering that the world’s largest cricket stadium Motera has a seating capacity of one lakh it would have required four Motera’s, and my voting slips would have entitled me to a corner seat in the upper stall of the fourth stadium perhaps!
Anyways moving on to the AGM itself. The chairman’s speech followed a predictable hierarchy of announcements by Mukesh Ambani beginning with Reliance’ JIO initiatives. Much has already been written about Mukesh Ambani fulfilling his promise of transitioning RIL from an Rs.160K crore net debt to a zero-debt enterprise and overshooting by over Rs. 50K crore through a rights issue and partner investments that include the latest Rs.33K Crores by Google. But it would be inadequate to restrict the analysis to just that or merely to numbers. Because for a company that is the size of RIL, with a Rs.6.5 Lakh Crore turnover (USD 85 B) and a market cap of Rs.12 Trillion (USD 155 B), it is the vision that it lays for itself, which offers a more holistic insight. I put forth my observations back to the front beginning with what was said at the end of the speech.
The end of speech reference by Mukesh Ambani of drawing inspiration from Swami Vivekananda is perhaps proof enough of the nationalistic ethos of the company. And that perhaps is the one ethos from early Dhirubhai days that has stood the company in good stead. To attempt everything that it does at a scale that touches the majority of Indian masses and at prices that they can afford has had a direct proportionality to RIL’s fortunes. Quite simply the logic has been, large population equals large fortunes for any company that gets it right. And RIL’s results have reflected this since early years.
The Nita Ambani section on Reliance foundation radiated positivity. Much needed in current times. Sports buffs like me would be particularly kicked about her voicing RIL’s commitment to Indians excelling in global sports. I have always felt, there is some connection between medals a country wins at global events and its economic performance, so when a behemoth like RIL commits to sport and even harbours a hope that India will host the Olympics someday sure warms many a sporting heart. Besides that, the sheer size of philanthropic activities undertaken, like the world’s largest food distribution program or touching 35 million people at the bottom quartile of privilege or engaging with over 20 million kids through education and sport is no mean achievement. All that work must be making a significant outside the balance sheet contribution to RIL in terms of goodwill.
The hidden from limelight loyal RIL O2C & Oil & Gas business (EBIDTA Rs.55K Crore) was next. It appeared that this is a trump card that Mukesh Ambani hasn’t even dealt yet and is still holding in his deck. The gargantuan business and value unlocking potential of this division could be sensed in the fine print of his speech. As digital will drive the world, so will sustainability. In fact, the latter for many may be of more significance. If the world is not sustained it will not sustain anything. Fossil fuel has lost its hegemony and Clean Tech and New Energy is where the future lies. And the plans for O2C & O&G division lie therein. The vision seems to be in place. Execution in part seems to have started. Research and application initiatives like an experiment to convert waste CO2 into a CO2 recycling circular economy that includes new materials, nutraceuticals, fuel, fuel cell etc. and the intention of becoming a zero-carbon company by 2035 are indeed visionary. The acknowledgement about the Saudi Aramco deal not progressing and the divisions relatively modest performance was perhaps only so because of M/s Mukesh Ambani and Manoj Modi being preoccupied with the massive JIO initiatives. An indication that NCLT will be approached to spin this division into an independent entity and a hint about potential investors waiting in wings clearly point at the next strategic charge. O2C & O&G division in its new clothes; Cleantech and new energy will be as big a game if not bigger. Shareholders are advised to fasten seat beat and hold tight.
It was indeed heartening to see the Reliance Retail number at Rs.1.6 lakh Crore. More so the profitability in the midst of a general gloom in retail all around. Hopefully the retail venture, besides playing the last mile cog in the JIO ecosystem becomes a vehicle for Indian brands to go global. Expensive retail space is amongst the major reasons why there is no global brand out of India. It’s a struggle to set up retail from Ginza to St Germain to Mayfair to 5th Avenue even for retailers like Titan. If the Reliance muscle can give a global digital and offline retail platform to Indian brands it would be a great service.
The Network 18 & Hathaway initiatives in the Reliance Media and Entertainment business will eventually merge in the JIO platform initiatives it seemed from the weightage they received in the AGM. That, in any case, would be a logical place for them in the long run.
I end with the big one JIO. Much has been already analyzed and written about. All that is happening at JIO, both in the connectivity & platform domains showcase the scale of RIL’s ambitions and its alignment with digital India. I am sure the entry-level smartphone plan would have set a bee in the bonnet of both Apple and the Chinese brands like Xiaomi and OnePlus. Applications like JIO TV plus, JIO Meet and JIO Glass demonstrated by Isha Ambani, Akash Ambani and Kiran Thomas demonstrated what’s on offer to end-users and startup entrepreneurs.
While the gloom story around debt was being written by many and which got accentuated by slow movement on the Saudi Aramco front, what everyone missed was that real work was being done in quite another geography, the Bay Area. One can only imagine the amount of work that must have gone into conceiving, strategizing and executing the deals adding up to over USD16 Billion with tough-nosed American Tech firms like Google, Facebook and Microsoft. And that too largely without even a fly on the wall sensing it. Speaks a lot about RIL’s stealth and precision capability from planning to execution. Every major tech player is in a partner position with Reliance now. I am keenly following the one missing in the bouquet, Amazon. Both are kind of competing and in the Indian context and at least my money is on Reliance. But that’s another story.
What I missed was some venture announcement in the industrial ecosystem but then idea pipelines are not revealed at AGM’s.
The fact that Mukesh Ambani appeared in healthy spirits with visionary zeal intact even after what must have been a high-pressure year must comfort a lay shareholder. His act of dedicating the homegrown 5G initiative to Prime Minister Narendra Modi’s Atmanirbhar call reinforced RIL’s nationalistic ethos.
Shareholders, especially those who are positive on India must take comfort from today’s AGM that the potential upside on their investments could be significant. As for me, RIL’s ability to pivot as it has showcased with JIO and the fact that the O2C card has not yet been dealt, even at 1850, I am going long on Reliance.
The elephant can dance. And I say this not from a seat in the upper stall in a stadium AGM, but from the front seat in my living room…
