India’s most-valued private company Reliance Industries (RIL) held its 44th annual general meeting (AGM) on June 24.
As it turned out, the bang was bigger than virtually anything that had been predicted. With the announcement of a multi-billion dollar investment in what has been dubbed as the lifeline to our collective future, Reliance Industries chairman Mukesh Ambani did his bit to dispel somewhat the pall of gloom that the pandemic has cast over Indian business.
The bet on green energy which Ambani, speaking at RIL’s 44th annual general meeting (AGM), said, would be the most exciting and challenging of his life, will turn the company from being a leader in a business based on fossil fuels into one that is potentially one of the green energy champions of the world.
Much like its forays into retail and telecom over the last 10 years, it is a move that is imbued with audacity and ambition.
Traditionally, a Reliance AGM raises expectations like no other. Over the last four decades, it is probably one of the most keenly-watched events on the Indian corporate calendar. While the festive nature of the 20,000 people-strong bashes that group founder Dhirubhai Ambani often orchestrated in his heyday, may now be a part of the wistful past, there’s no denying its significance even in these virtual times.
It isn’t so much about the numbers; that is for the analysts to parse at leisure. Instead it is about the connect between the company, which has for years carried the highest weight in the Sensex, and the two million-plus retail shareholders who have always been the group’s key constituency. Those who have attended these meetings speak of what Ambani called the “intimacy and warmth”, the familial nature of the interactions, even on the few occasions that they have gotten testy.
Which is why the gradual introduction since 2016 of the next generation of the family - Akash, Isha and Anant - has been such a critical part of this bond. Simply put, shareholders look for continuity of the promoter family. It creates trust, so integral to a long-term investment decision.
In the Reliance scheme of things, the AGM is a corporate asset, to be nurtured as such.
Not surprisingly then, it is also the stage to unveil the ambitions of the group, much in evidence at this year’s AGM. The over $10 billion investment in building a fully integrated clean energy ecosystem that would not only take advantage of India’s abundant solar capacity but also go into green hydrogen and fuel cells, was of course the big takeaway. Given India’s standing as one of the world’s biggest energy markets which is still way behind in usage per head as compared to countries like the US and China, it is a huge play on the guaranteed demand but one that will require a very carefully calculated transition from the traditional to the new.
Vitally, it is of a piece with the old Reliance playbook of focussing on the basic requirements of people’s daily economic lives - it is said that Dhirubhai once wanted to make affordable footwear for Indians. Add to that the all-in strategy both in terms of financial investments as well as commitment, and it is a formidable aspiration.
Equally strategic was the anticipated announcement about the launch of a low-priced smartphone in a country where the market for these, even after the most difficult year on record, grew 23 percent Y-o-Y to reach over 38 million units in Q1 2021, according to Counterpoint Research data. Not only does it fit into the mantra of a self-reliant India, it is also a smart nudge for all the other non-energy businesses that the group is pursuing. The smartphone is the vehicle of entry for potential users of Jio’s services like telecom, healthcare, e-commerce and entertainment. Producing it in India with technological assistance from Google and pricing it such that it is accessible to the over 300 million Indians who can’t afford high-priced phones, is a vital part of Jio’s overall game plan.
Significantly, with announcements across the O2C, telecom and retail businesses, the company also signalled recognition of the atomization of its investor base into distinct interest groups. The process has been under way. In February this year, it announced that it would hive off O2C, the most mature of its businesses, into a separate entity. For nearly 10 years, the strong cash flows from the refining and petrochem business have bankrolled the newer ventures in telecom and retail. Now with both the businesses contributing significantly to RIL’s earnings, O2C can take its logical path in the new energy plan.
Audacity and scale have been the twin pillars of any target that RIL has set for itself in the past. Now as its core energy business is in the midst of a massive metamorphosis, Ambani isn’t looking at incremental change but a once-in-a-lifetime transformation. It is a risky bet but for the sake of India it is certainly worth it.Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.