RIL AGM: What Shareholders Can Expect From Mukesh Ambani Today
When Mukesh Ambani rises to address shareholders today, he would be have met most of his promises made a year ago. What’s next?
Mukesh Ambani would have met most of his promises made a year ago when he rises to address shareholders at his flagship’s annual general meeting on Wednesday.
Reliance Industries Ltd. undertook a deleveraging exercise at breakneck speed in the last three months amid a pandemic-induced lockdown. It raised over Rs 1.18 lakh crore through a stake sale in Jio Platforms Ltd., raised more than Rs 53,000 crore from a rights issue—the proceeds of which will come by November 2021—and signed a partnership with BP Plc., which helped the company net Rs 7,000 crore.
All these initiatives have ensured RIL will be net debt-free as promised by Ambani at the last AGM.
Here’s what shareholders can expect at RIL AGM 2020 today:
Ambani consolidated all his digital properties under Jio Platforms and sold 25.24% stake to 12 investors at valuations higher than Facebook Inc. and a tad lower than that of Alphabet Inc. and Alibaba Group Holding Ltd. The company would focus on getting 10 of its subsidiaries to generate significant revenue in the next few years before they can be listed on the exchanges. Ambani has promised to list Jio in the next five years. RIL’s only prominent business at present is its telecom arm, and the key would be to show a path of comprehensive revenue growth for Jio Platforms’ subsidiaries so that it retains valuations of a platform company.
Consumer Businesses, Facebook Tie-Up
Consumer businesses (Retail and Jio) comprise more than a third of RIL’s consolidated operating profit, which RIL plans to increase to 50%. Ambani is expected to highlight the way forward for the tie up with Facebook, which has acquired 9.9% stake in Jio Platforms. Last year’s AGM was largely about RIL’s partnership with Microsoft Corp. to set up cloud centres using Azure, its cloud computing service. This year, Ambani is likely to also articulate on leveraging the social network for retail and e-commerce ventures.
Facebook’s WhatAapp and Reliance Retail and Jio Platforms have already inked an agreement to leverage the messenger service for its e-commerce foray. Shareholders will get a glimpse of the blueprint of this relationship and its path over the next few years. The street is also expecting the launch of a super app that will consolidate all of its digital properties.
JioMart, RIL’s e-commerce venture, was launched in the last few months, and it will be interesting to see how it’s integrated with local stores and the online payments through WhatsApp. The messenger service is yet to get approval for its payments license in India through it has been running a beta in India and Mexico. It has already launched its payment services in Brazil.
Reliance commercially launched Jio Fiber in September 2019, and planned to reach 20 million homes and 15 million businesses. Jio Fiber had less than a million subscribers as on February 2020, according to data from the telecom regulator. Ambani is likely to announce the roadmap for rollout of the home broadband service for mass adoption which is today priced at a premium to other players. Ambani had stated that Fiber-To-The-Home rollout will be completed within 12 months. A successful rollout will be key to achieving the targeted 500 million subscribers.
At the last RIL AGM, Ambani had announced that RIL had signed an agreement with the Saudi Arabian Oil Co. to sell up to 20% in its refining and chemical business at an enterprise value of $75 billion. The company has since started the process to demerge its oil and petrochemical business into Reliance O2C (oil to chemicals). Reliance has maintained its discussions with Aramco are in advanced stage. Ambani is likely to set a target of converting 70% of crude oil to petrochemicals from 24% at present as the fuel market gets saturated and increased demand for electric vehicles reduces demand for petrol and diesel.
Monetisation Of Assets
Reliance is also in discussions with potential investors to sell stake in its Jio Optic Fibre investment trust. It has already divested its tower business to Canada’s Brookfield Infrastructure Partners LP (Tower Infrastructure Trust by BIF IV Jarvis India Pte.), British Columbia Investment Management and GIC Investors.