Reliance: Your cheat sheet for the AGM today

Reliance: Your cheat sheet for the AGM today

Last updated: 15 Jul, 2020 | 08:21 am

Reliance: Your cheat sheet for the AGM today
  • Reliance Industries which stands as the largest company by market cap in India is a conglomerate with businesses ranging from Petrochem to telecom.
  • The major chunk of their revenues still comes from their Oil and Petrochem business 
  • This however is changing with the group aggressively pushing the Digital and Retail Segments.
  • 'Reliance had embarked on a massive $40 bn capex cycle between 2013-2018 to transform its Refining business as well as roll out of Retail and Jio telecom services across the country.'{{tweet1}}

Let’s look at the fastest growing segment of Reliance in recent years: Reliance Retail

What constitutes Reliance Retail?

  • Although started in 2006, this division has been growing at breakneck speed in the last few years with the roll out of Jio. Sales of data packs and Jio phones constitute 33% of Reliance retail’s revenues
  • 'Retail added over 1500 stores in the last FY to take it’s total tally to 11,784 pan India. Reliance is now the largest retailer in India by revenue.' {{tweet2}}
  • Grocery has emerged as a very important segment under Reliance Retail, with YoY growth of nearly 50% in FY20. Reliance Retail and WhatsApp have announced creating a JioMart platform using WhatsApp and to support small businesses on WhatsApp. This is likely to further boost growth in the upcoming years for this segment. 
  • India’s retail market is estimated to grow at a CAGR of 10% over next 5 years to reach $1.3 Trillion by FY 2024-25. 
  • Organised retail is expected to grow at a CAGR of 21% over next 5 years to reach US$230 billion by FY 2024-25. 
  • Given Reliance Retail’s leadership position and growing omni-channel approach, this looks a sector that will continue to drive fast growth while taking a bigger chunk of the revenue pie within the company

The Youngest, most exciting division of the conglomerate is Jio Platforms

  • Jio, which shook up the telecom industry since it was introduced in 2016, left the industry reeling with an aggressive pricing strategy and has rapidly scaled to become India’s top telecom player with a market share of over 35%
  • Reliance Jio Infocomm in it’s latest Quarter reported a 26% growth in revenue to 14,835 cr while net profit almost tripled to 2331 cr!
  • These numbers are expected to improve further as the industry Average revenue per user (ARPU) are expected to return to Rs 200 over the next year
  • Jio Platforms has been in the news this year for having raised ₹1.18 lakh crore from leading global investors including Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG, L Catterton and PIF since April 22, 2020, rendering Reliance Industries virtually net debt-free.

Jio Suite of Apps

  • In addition they have been on an acquisition streak across the digital landscape
  • 'All together, Reliance seems to be in pole position to transition from a Oil driven conglomerate to a digital behemoth across sectors in India'{{tweet3}}
  • Post the mammoth fund raise this year the company has cleared it’s debt and is now actually in a cash surplus with rumours of more fund infusion to come!

What can you expect in the AGM Today?

  • Road map for JIO Platforms: Jio is transitioning from a pureplay telecom company to a platform. Although details on business plans and revenue from these platforms remain scarce, the AGM should set the stage for the path ahead including details of it’s strategic partnership with Facebook ( WhatsApp)
  • Roadmap for Oil Business: Post an unsuccessful stake sale in the last quarter to Saudi Aramco (RIL was to sell a 20% stake in refining business), the company is expected to further detail status on the stake sale as well as roadmap for the petchem business.
  • Roadmap to Demerger: Mukesh Ambani has promised to demerge Jio from the Oil and chemical business in the next 5 years. This will cause significant value unlocking as each division will get separate valuations. 
  • Future Retail acquisition? : A past competitor in retail, there have been rumours of an acquisition of the Future group’s retail arm. Currently clocking over 20,000 cr in revenue with a 6000 cr outstanding debt.
  • Special Dividend: Given the robust performance of the company, there could be an announcement of some special dividend. Stay tuned!