Saturday, May 25, 2019
Follow us on
Business

Mukesh Ambani’s Big Bet on India’s Rising Middle Class is Paying Off

April 20, 2019 06:14 AM

COURTESY ET APRIL 20

Expert Take
Mukesh Ambani’s Big Bet on India’s Rising Middle Class is Paying Off
PR SANJAI

Billionaire Mukesh Ambani’s debt-fuelled bet on the rise of the Indian consumer is starting to pay off, with his retail and telecommunications businesses contributing an increasing share of revenue and profit to his $87 billion empire.

The two divisions accounted for a combined 23% of revenue for the year ended March, up from 17% in the previous year, according to data compiled by Bloomberg. That growth has come at the expense of the conglomerate’s energy-related arms, which have been the bedrock of Ambani’s business for more than a decade. Their revenue share dropped to 77% from 83%, the data show.


Asia’s richest man has ambitions to take on Amazon.com Inc. and Walmart Inc. in India, where the power of the middle class is growing along with demand for e-commerce. Ambani launched the telecommunications business in 2016, spending $36 billion to roll out a 4G wireless network across India and luring millions of subscribers with free or cut-price data services. He’s now building on that business to create an online shopping platform, just as the US giants come up against constraints on foreign ecommerce activity in India.

Ambani has set big expectations for Reliance’s consumer divisions, saying they will contribute almost as much to the conglomerate’s earnings as energy-related arms by the end of 2028.

The push into e-commerce shows how the billionaire is trying to put his mark on an empire that he largely inherited. Ambani, whose father Dhirubhai founded Reliance in 1959, agreed to split the businesses with his brother Anil three years after their father died without leaving a will. Mukesh got control of the flagship oil refining and petrochemicals arms.

Anil got Reliance’s newer services businesses in the split, including telecommunications. His brother’s entry into the industry and resulting price war has hit many rivals -- including Anil’s Reliance Communications Ltd. -- undercutting market leaders Vodafone Idea Ltd. and Bharti Airtel Ltd. in a price war.

Reliance Jio Infocomm Ltd., Mukesh’s telecom unit, saw profit in the year quadruple to 29.6 billion rupees ($427 million), the company said Thursday.

The Tiny Deals Behind Mukesh Ambani’s Bid to Take on Amazon But he’s racked up borrowing to finance that push, with Reliance Industries’ net debt climbing to 1.93 trillion rupees in the year ended March, or about 2.3 times ebitda, according to data compiled by Bloomberg. That compares with the 2.69 times average for companies on the S&P BSE Sensex index as of Dec. 31.

In his quest to build a competitive e-commerce platform, Mukesh Ambani, 62, has been acquiring or purchasing stakes in businesses from Radisys Corp. to Vakt Holdings Ltd. in a series of deals worth $2.5 billion over the past two years. Reliance, Amazon and Walmart’s Bangalore-based Flipkart Online Services Pvt. are seeking to carve up an online shopping market that Morgan Stanley estimates will grow to $200 billion by 2028, from about $30 billion last year

 
Have something to say? Post your comment