Ambani sold a technical dream for $ 27 billion. Now he has to deliver

Photographer: Prodip Guha / Getty Images

Mukesh Ambani spent much of 2020 convincing Facebook Inc., Google and a handful of heavyweights from Wall Street to buy their vision for one of the most ambitious corporate transformations in the world.

Now fueled with $ 27 billion in new capital, Asia’s richest man is under pressure to perform.

The 63-year-old Indian tycoon is focused on a handful of priorities as he tries to change Reliance Industries Ltd. went from being a conglomerate of the old economy to becoming a titan of technology and e-commerce, according to recent public statements and people familiar with the company’s plans.

This includes product development for the planned implementation of a local 5G network next year; incorporating WhatsApp from Facebook payment service on Reliance’s digital platform; and integration of the company’s e-commerce offerings with a chain of physical family stores across the country. Ambani is also moving forward with plans to sell a stake in Reliance’s oil and petrochemical units, an agreement he originally had he hoped to reduce debt and finance his high-tech pivot earlier this year.

Every move

Investors are watching Ambani’s every move as he reforms his empire – with a market value of $ 179 billion – in the midst of a pandemic, entering highly competitive sectors and facing rivals from Amazon.com Inc. for Walmart Inc. Reliance shares have risen up to 55% this year, reaching an all-time high in September, but have since shrunk earnings as stakeholders seek more evidence that Ambani can perform.

“The jury is decided,” said Nandan Nilekani, co-founder Infosys Ltd. in 1981 and now serves as president of the Bangalore-based software services provider valued at about $ 72 billion. “There is a lot of work to be done.”

A spokesman for Mumbai’s Reliance Industries declined to comment.

Empire of Ambani

Asia’s richest man bets on technology and consumer services

Sources: Reliance, data compiled by Bloomberg

Although Ambani has publicly embraced his new partnerships with investors, including Facebook (he and Mark Zuckerberg exchanged praise during a live broadcast conversation on December 15), the Indian tycoon’s wave of fundraising was initially designed to be more of a Plan B. Its original goal was sell a 20% stake in Reliance’s oil and petrochemicals division to Saudi Arabian Oil Co., with a business value of US $ 75 billion, which implies an evaluation of US $ 15 billion for participation.

The Aramco agreement, first announced in August 2019, should help Ambani fulfill a pledge of get rid of your company’s $ 22 billion net debt in 18 months. But as you talk to the Saudis paralyzed, Reliance investors became more anxious. The stock fell by more than 40% in the three months to March 23.

Hit a wall

Ambani, who began exploring sales of his digital services and retail units months earlier, decided to speed up these negotiations after the Aramco deal hit the wall, people familiar with the matter said.

The response from investors exceeded the company’s expectations, said one of the people, with renowned sponsors, including KKR & Co., Silver Lake and Mubadala Investment Co. commits more than $ 20 billion to the digital business and $ 6.4 billion to retail. Reliance it declared itself net debt free in June, nine months before its self-imposed deadline, and Reliance’s stock soared.

At Reliance’s annual shareholders’ meeting in July, Ambani and her older children, Isha and Akash, outlined the broad momentum of their high-tech ambitions. Among the new services they announced was a 5G wireless network as early as next year and a video streaming platform that will bring Netflix, Disney + Hotstar, Amazon Prime Video and dozens of TV channels under the same umbrella.

Reliance digital unit, Jio Platforms Ltd. will also develop a portfolio of technology solutions and applications for millions of micro, small and medium-sized enterprises in India, Ambani said, adding that it plans to expand the platform abroad.

The company’s top priority for 2021 is 5G, said people familiar with the matter. While regulators have not yet auctioned the rights to India’s next generation radio waves, Ambani said this month that his company “will pioneer the 5G revolution in India in the second half of 2021”.

$ 54 Smartphone

Reliance is planning to present its 5G product line at next year’s shareholder meeting, which normally takes place between July and September, one person said. The company is also working with Google on a $ 54 Android-based smartphone, part of the strategy to get more Indians to use mobile data for services, including video streaming, online games and shopping.

Reliance sees integration with WhatsApp recently approved the payment system as a crucial step in the development of its online shopping services, people said. The companies are working together as Reliance’s e-commerce platforms seek to reach hundreds of millions of Facebook, WhatsApp and Instagram users.

Ambani’s biggest challenge now is to get a return on those investments, said James Crabtree, author of “The Billionaire Raj: A Journey Through India’s New Gilded Age”.

The sectors that Ambani targets are constantly evolving, far more than the refining and petrochemical businesses, which still represent the majority of Reliance’s revenue. “He has to get it right continuously,” said Crabtree.

‘Key Man’ risk

There is also the “key man” risk challenge. Ambani – the face of Reliance – is not getting any younger. Although the company has not publicly released a succession plan, India’s Mint reported in August that Ambani, whose the net worth is about $ 77 billion, is establishing a family council and intends to complete the succession planning by the end of next year.

“Any large single-pillar building has inherent great risks,” said Kavil Ramachandran, executive director of Thomas Schmidheiny Center for Family Enterprise at Indian Business School.

Ambani’s supporters point to his recent history of disruptions. It revolutionized India’s telecommunications sector four years ago, offering free calls and cheap data, leading some rivals to bankruptcy. Your wireless carrier, Reliance Jio Infocomm Ltd., now has more than 400 million subscribers.

“Mukesh has been a big part of this wave of innovation,” said Sundar Pichai, CEO of Alphabet Inc., owner of Google. “His vision and focus on a future where all Indians can benefit from the opportunities that technology creates are really exciting for us and we are happy to be partners in this work.”

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