At one stroke, Reliance Industries chairman Mukesh Ambani has addressed the concerns that some investors and analysts had about the debt on RIL’s balance sheet. At the company’s 42nd Annual General Meeting, Ambani said RIL would be a zero net debt company in eighteen months.
The company’s deals with Aramco and BP will generate huge amounts of cash, while inducting global partners in its consumer businesses will also help. Investors will welcome the value addition that Aramco and BP will provide to the company’s Oil to Chemicals business. Also reassuring is the announcement that the company is all set to shift from an investment to a growth phase in Jio. And investors will appreciate the other initiatives announced at the AGM, not least the partnership with Microsoft. The stage has been set for a re-rating of the RIL stock.
But perhaps what is far more important is the impact that RIL’s policies have had on the Indian economy. In transforming itself from a predominantly oil and gas firm into India’s leading customer-facing digital company, RIL has also had a big impact on the economy. By driving down the price of connectivity and providing it to remote corners of the country, RIL has helped build a digital highway that is perhaps even more transformative than the government’s rural road building programme. It has aided the creation of an entirely new ecosystem with food delivery companies, e-commerce firms, fintech companies, providing new jobs for hundreds of thousands. It has helped put in place an infrastructure that can usher in big changes in productivity among millions of small producers. In the social sphere, the digital highway will assist greatly in education, e-governance and healthcare. It has been an important part of the digital transformation of Indian society.
At the AGM, new announcements were made that would take that process further. Reliance Retail’s tying up with millions of small kirana stores is a case in point. This initiative, called New Commerce, has the potential to change the unorganised retail market in the country, not only making it more efficient, but also going a long way in increasing formalisation of the economy. Another partnership is being created in JioFiber with local cable operators.
Then there’s the plan to set up datacenters across the country, which will bring in blockchain technology and Microsoft’s cloud computing platform to businesses, especially small and medium sized firms. The decision to offer connectivity, automation and productivity solutions free to start-ups and at much reduced costs to small and medium businesses will enable them to become more efficient, besides bringing down costs for consumers.
To be sure, it’s not going to be an easy task. Technology can change swiftly and competition is strong. But then RIL’s track record has been reassuring. As the RIL chairman pointed out at the AGM, ‘At the end of our largest capital expenditure cycle, we continue to be rated AAA for domestic debt and two notches above Sovereign rating for international debt - the highest ratings for any industrial company in India.’
There have been several facets to RIL’s strategy. The company has been quick to spot the huge opportunities in digital technologies that will disrupt old ways of doing business. It has not been afraid of making big bets on its core convictions. It has had the flexibility to partner with other global leaders to achieve its objectives and to monetise its assets when required. It has focused on execution. And in the process, this has led to new jobs, new firms and new ways of doing business but also to the diffusion of new technology among millions of small businesses and consumers.
This, after all, is how capitalism at its best is supposed to work.
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