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Podcast | Editor's Pick of Day – Why Reliance is on an acquisition spree

The company made two strategic investments that RIL made in Den Networks, Hathway Cable and Datacom.

October 19, 2018 / 09:48 PM IST
 
 
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The second quarter results of Reliance Industries are out and the response to the earnings has been mixed to say the least. Despite registering its highest-ever quarter profit, Reliance was one of the major drags on the Sensex today. What else is also out is the news that RIL has been making a few new deals.

Reliance Industrial Investments and Holdings Limited, a wholly owned subsidiary of Mukesh Ambani-led Reliance Industries Limited (RIL), acquired 12.7 percent shareholding in SkyTran Inc. A US-based technology company, SkyTran aims to solve traffic congestion by introducing personal rapid transit systems. The news of this Reliance alliance with SkyTran comes close on the heels of two strategic investments that RIL made in Den Networks and Hathway Cable and Datacom. RIL made an investment of Rs 2,290 crore for 66 percent stake in Den and Rs 2,940 crore for 51.3 percent stake in Hathway. What these alliances mean for Reliance will be the major talking point on this edition of our Pick of the Day. My name is Rakesh Sharma, and you are listening to Moneycontrol.

Nitin Agrawal, writing for Moneycontrol, goes on to note, “In recent times, Reliance Industries (RIL) has shifted its focus from traditional to futuristic businesses driven by advanced technology that could improve quality of life and make the business relevant for the future.”

Jio, launched last year and quite possibly the biggest disruptor in the mobile technology space we have seen in recent times, is driven by VoLTE technology, an advanced technology to transfer calls over data networks. It is in the same vein of future-forwardness that this acquisition of 12.7 percent shareholding (on fully diluted basis) in SkyTran can be seen. RIL also has the option to further invest up to $25 million in convertible notes, subject to approval from SkyTran’s board.

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Anyone stuck in Bangalore traffic, or for that matter, LA traffic, knows only too well what a menace intense road traffic can be to a good quality of life, and indeed economic development across the globe. SkyTran is a company that aims to address this all too familiar, all too global, problem by creating a transport option that is high-speed, scalable, and low-cost. Commenting on the investment, Akash Ambani, Director, Reliance Jio, said, “Our partnership with SkyTran reflects our commitment to invest in futuristic technologies. Reliance is well-poised to capitalize on its existing business portfolio and capabilities to accelerate the development of SkyTran across the world and especially in India.”

John Cole, Founder and CEO at SkyTran, said, “We are excited to be working with Reliance. Reliance brings tremendous infrastructure and technical expertise and the ability to execute at the largest scale. We believe our partnership with Reliance has the potential to improve the lives of people in India and across the globe.”

SkyTran, which has partnered with National Aeronautics and Space Administration (NASA) in the US and Israel Aerospace Industries (IAI) in Israel, has developed magnetic levitation (MagLev) technology for implementing personal transportation systems aimed at solving the problem of traffic congestion globally. MagLev is a technology some of us are familiar with – the fastest speeds achieved for a train – 603 kmph – was in Japan by JR Central's L0 superconducting Maglev on 21 April 2015.

SkyTran has 8 approved patents and 40 plus patents are pending approval, globally, including in India. The proposed SkyTran network would consist of “computer-controlled passenger pods running on its patented Passive Magnetic Levitation technology and would use IT, Telecom, IoT and Advanced Materials technologies to transport passengers in a fast, safe, green, and economical manner.” Following this investment, Reliance said it will work closely with SkyTran to develop pilot implementations followed by implementation of its network in India at scale. Reliance would also play an active role in further advancing the SkyTran solution, especially in Telecom (4G/5G/IoT/Giga Fiber), Digital Platforms and Services, Advanced Materials & Electric Batteries areas. Reliance would also nominate a director on the Board of SkyTran.

Reliance is not the first big name to be interested and investing in SkyTran. The company has received funding from well-known names like Google Chairman Eric Schmidt. Even the US Department of Transportation has provided funding to SkyTran.

The SkyTran partnership with RIL in India aims to address the burgeoning personal and economic problem of road congestion by building a rapid transit system. Run on non-polluting technology, this partnership also aims to address the increasing levels of pollution in modern India. From the perspective of Reliance, the partnership with SkyTran is an indication of a growing willingness to participate in the technology of tomorrow, and position the petrol-to-telecom giant as a leading figure in adapting to the ways of a fast-changing world. Considering the alarming report from the UN IPCC, it is about time that behemoth corporate houses that rely on non-renewable sources not just for their own profits but also as the fuel for nation-building, start thinking of ways to race towards zero emission, and this may well be seen as a token step in that direction. How practical it will be, and if it will ever take off, or levitate shall we say, is anyone’s guess.

Recent acquisition spree by alliance

Reliance, being Reliance, does not need the excuse of Diwali and Dussehra to go on a shopping spree. It has been on one for the past year or so. As of July this year, the company had struck at least 12 deals over 12 months with an estimated tab of about Rs 28,900 crore ($4.21 billion), according to calculations by Jefferies Group LLC and Bloomberg. Ten of these are related to Mukesh Ambani’s consumer business. Ambani has also capitalized on India’s ongoing bad-debt issues with purchases of distressed or insolvent companies including a local textile-maker, a carbon-fiber firm and the wireless assets of an indebted telecom company, reported Mint earlier in July this year.

The acquisitions also point to a certain pattern, according to industry-watchers. To build an integrated digital offering around the emerging crown jewel of the Reliance family, Jio. If pre-2017 was the era of petrochemicals and building massive refinery complexes, it seems post-2017 is going to be a new big chapter in the Reliance saga with Jio as its protagonist with all these other acquisitions and deals in one way or other lending a supporting role to the hero, Jio Ambani. Jio Ambani also hopes to be the leader of the new tech space. Last month, RIL invested $8 million in San Diego-headquartered NetraDyne Inc., an artificial intelligence (AI) start-up. In June, RIIHL had invested $16 million in the start-up that focuses on fleet management, automotive, security and surveillance. The company’s latest investment translates into a 37.4 percent equity stake in the firm, RIL said in an exchange filing.

In the past year alone, RIL and its subsidiaries, have been acquiring stakes in various ventures that can one way or other be linked to the bouquet offerings that Jio hopes to be – in terms of boosting digital content for Jio, there are partnerships with The Indian Film Combine, Eros International, and Saavn.

In order to enhance the artificial intelligence arm of Jio, in addition it to its venture with NetraDyne, Reliance has pumped in $180 million in Bangalore-based Embibe, which uses data analytics to deliver personalised learning outcomes to students. KareXpert, another venture that RIL has invested in, is developing a one-stop digital health platform. Earlier in June, Reliance acquired Oregon-headquartered Radisys Corporation, which it said would help accelerate Jio’s global innovation and technology in areas of 5G, IoT and open-source architecture adoption.

Considering it’s Navratri, I am tempted to think of Durga with her ten arms, each wielding a different weapon. Jio seems to be morphing into a similar entity – godly or not – with each of these ventures arming it with new qualities. The businesses that established RIL as a gargantuan force will, no doubt, continue to play a role in the company’s evolution into the 21st century, but the lead will be taken over by the new digital kids on the block – Jio and JioGigaFiber – currently in prep school, acquiring all that they need to be the new (and hopefully green) leaders of the Reliance family, and therefore by extension, 21st century India.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd
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first published: Oct 19, 2018 09:48 pm
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