RIL on the cusp of a digital makeover
29 Oct 2019
The board of Reliance Industries Ltd (RIL) has approved a proposal to create a Rs1,08,000 crore fully owned subsidiary e-commerce company, paving the way for RIL becoming a holding company.
Chairman Mukesh Ambani on Monday unveiled plans to set up a $24 billion digital-services holding company for his digital business, including online shopping business.
As per the proposal approved by the board of Reliance Industries, an amount of Rs1,08,000 crore ($15 billion) will be invested in the fully owned subsidiary, which will in turn invest that amount in Reliance Jio Infocomm Ltd, the telecom arm of RIL.
Ambani also plans to make Reliance Jio debt-free through a series of capital transfers. Jio, which has a present capital base of Rs65,000 crore, will be almost debt free by March 2020, according to RIL.
Following the equity infusion, Reliance Jio will transfer liabilities worth Rs1,08,000 crore to a subsidiary of the parent, turning Jio almost debt free, excluding airwave-related liabilities.
Mukesh Ambani had, during the launch of Jio, said “data is the new oil,” in a sign that the conglomerate is shifting focus from oil to data and digital services business, as a prelude to building an online platform like Amazon and Walmart to link its retail business to consumers.
Ambani told shareholders in August that RIL’s new businesses, including retail, are likely to contribute half of the company’s earnings in a few years, against 32 per cent at present.
RI is also likely to go for an initial public offer with its holding arm, setting the stage for the online business to get rolling. The holding company will likely function on the lines of Alibaba Group Holdings Ltd and Alphabet Inc. Investment in the holding company will be through optionally convertible preference shares. The unit will acquire the parent’s equity investment of Rs65,000 crore in Jio, according to Reliance Industries.
Ambani has also been stitching together a network of partners through acquisitions and stake purchases to build a backbone for his e-commerce plans. “Given the reach and scale of our digital ecosystem, we have received strong interest from potential strategic partners," Ambani said in a statement. “We will induct the right partners in our platform company, creating and unlocking meaningful value for RIL shareholders."
Shares of Reliance Industries have rallied 28 per cent this year, compared with an 8.8 per cent gain in the benchmark BSE Sensex.
Ambani said in August that Reliance Industries has spent almost $50 billion on Jio, whose entry with free calls and cheap data forced some rivals to exit or merge in a consolidation that shook up the industry.
Jio had a debt of about Rs84,000 crore as of 30 September, chief financial officer V Srikanth said earlier this month. Jio also reported a stand-alone profit of Rs990 crore for the quarter ended 30 September on revenue of Rs12,354 crore.
Mukesh Ambani had also announced a plan to sell 20 per cent of RIL’s oil and chemicals business to Saudi Arabian Oil Co at an enterprise value of $75 billion. Ambani is in the process of cleaning up the parent’s balance sheet, by making it debt free in less than two years.
RIL said Reliance Jio has built world class digital infrastructure and ecosystem, comprising of:
- Best in class end-to-end all IP network
- Tower and fiber infrastructure
- Content delivery network
- Digital applications and platforms
- Cloud infrastructure
- Technology capabilities
RJIL, according to RIL, has also emerged as the platform of choice with industry leading operating metrics that rank amongst the highest globally:
- Second largest single-country operator globally, with 355 million subscribers;
- Strong customer engagement metrics;
- Wireless network carries more than 400 crore GBs of data per month, and nearly 10 billion of voice minutes per day;
- Per capita mobile data usage of 11.7 GB/user/month; and
- rending towards half a billion customers, with net additions of 8-10 million per month.
This strong operating performance and customer engagement is backed by an end-to-end all IP network offering converged wireless and wireline solutions.
With completion of majority of RJIL’s capital expenditure, for optimising operational efficiencies and better monetization of the Core Digital Connectivity Platform, tower and fiber passive infrastructure assets of approximately Rs1,25,000 crore were demerged from RJIL in March 2019 to Infrastructure Investment Trusts (InvITs).
Post this demerger, RJIL has become asset light having a balance sheet size of Rs2,37,000 crore.
The group has been developing and fostering a vibrant digital ecosystem through various digital applications, tools and platforms (Digital Platforms) spanning self-care, information, entertainment, chat, utility tools etc.
Most of these Platforms are best in class with high customer engagement metrics and differentiated features in their respective categories:
- MyJio: An omni and self-care through single login app, ranks amongst the largest selfcare apps in the world;
- JioTV: India’s #1 live TV app; with wide bouquet of channels spanning 16 languages, 11 genres, 630+ channels, 135+ HD channels;
- JioCinema: Amongst the top video entertainment apps in the country; built on state-of-the-art tech platform;
- JioNews: India’s leading news and magazines app with the best-in-class content bouquet covering 900+ magazines, 300+ newspaper editions; varied contents formats including Live TV, Short videos, News articles;
- JioSaavn: #1 music app in the country; continues to be the fastest growing streaming platform, with 45+ million tracks under license across 16 languages with differentiation through Artist Originals Programme.
The group continues to focus on cutting edge, technology enabled Digital Platforms that enable and accelerate digital society with, frictionless and seamless universal access and adoption:
- Healthcare
- Education
- Agriculture
- Commerce
- Government-to-citizen services
- Gaming
- Manufacturing and many others.
These Platforms are also backed by investment in following emerging and next generation technologies like Blockchain, Artificial Intelligence and Machine Learning, Virtual, Augmented/Mixed Realty, Computer Vision, High Performance and Edge Computing, Natural Language Processing and Voice enabled services
A world class New-age Digital Technology Platform entity is proposed for:
- Holding all Digital Platforms including RJIL, the Digital Connectivity Platform;
- Further development initiatives of cutting-edge technologies;
- Fostering inclusive Digital Society through collaborations & partnerships;
- Capital and organisation structure that is benchmarked to global digital technology players;
- Compelling Investment Thesis with unencumbered capital structure; and
- Enabling early monetisation .opportunities.