Is Mukesh Ambani Hinting At Taking His Consumer Businesses Public?
Mukesh Ambani hints that his consumer businesses are ready to go public soon.
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Reliance Industries Ltd promoter Mukesh Ambani’s description of the maturity of the company’s consumer businesses, Reliance Jio Infocomm Ltd and Reliance Retail, could suggest that they are ready to go public soon.
“The year saw our consumer businesses attain a threshold, where from they will start contributing meaningfully to consolidated profits,” Ambani said in his letter to shareholders as part of the annual report for the year ended March 2018. “From a mere 2 percent in the financial year 2016-17, Jio and Retail accounted for 13.1 percent of Reliance Industries’ consolidated segment EBITDA (earnings before interest, tax, depreciation and amortisation) in FY17-18.”
That may be good news for shareholders as Ambani had indicated in a previous shareholder meeting.
According to that the group will unlock value in these businesses once they attain a certain threshold, without specifying what that would be. The Reliance shareholders’ meet is slated for 5 July.
Bloomberg had reported in December last year that Reliance was weighing an initial public offering for its telecom business, Reliance Jio.
The company is looking at consumer businesses contributing on a par with its energy and materials business over the next decade, Ambani said in the annual statement. Together, these businesses reported a revenue of $14.2 billion last year.
Reliance Jio
Reliance Jio ended the year with a gross revenue of Rs 23,916 crore and earnings before interest and tax of Rs 3,174 crore.
The company is also targeting 99 percent nationwide footprint by the end of the year.
It entered the Indian telecom industry with a free-for-life call service last year, which triggered a price war and consolidation in one of the world’s most crowded mobile markets. That whittled down the number of operators in the country to three to four from seven to eight players ahead of Jio’s launch in September 2016.
The consolidation may continue as Reliance unveils its next move, Ambani indicated. “Now, it's the turn of home and wireless broadband convergence to drive an all-pervasive internet of things and fully-enabled digital life.”
The operator will offer a bouquet of media/over-the-counter platforms to customers.
It will also enter into exclusive partnerships like the ones with Balaji Telefilms, Eros and Saavn.
Jio is also looking to build a Jio advertisement platform as part of its digital tech initiative, the annual statement said.
Reliance Retail
The company’s retail business more than doubled to Rs 69,198 crore in the last financial year, recording its highest ever EBIT of Rs 2,063 crore. Favourable macroeconomic parameters, a young and aspiring population, growth of digitisation and internet penetration, shift from traditional to modern retail channels, including e-commerce, are likely to drive this consumption boom, the company said.
Reliance Retail plans to expand “aggressively” to capture a significant share of the organised retail market which is expected to grow threefold to $61 billion by 2024-25, it added.
The company doubled the number of its outlets to 7,573 in 4,400 cities across India from 3,616 a year ago while its retail footprint increased to 17.1 million square feet from 13.5 million sqft.
Global Outlook
Ambani said the global economy is growing at its fastest pace since 2010. “Stronger investment, the rebound in global trade and higher employment are helping make the recovery increasingly broad-based."
Global oil demand is expected to be strong and growing demand and reducing inventories augur well for the refining industry over the next 12-18 months, he said.
But growing protectionism impacting trading relations and geopolitical tensions in parts of Asia are key areas of concerns, Ambani cautioned.
(This article was originally published on BloombergQuint)
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