Deals done, now RIL needs to demonstrate its swift execution prowess

We now need to wait for execution especially in 5G and Jio Mart. With the Aramco deal unlikely to happen, most of the excitement could be over for the time being

The annual general meeting (AGM) of Reliance Industries (RIL) is one of the most-awaited annual events in the Indian stock markets as well as the corporate calendar, possibly second only to the Union Budget. The late Dhirubhai Ambani had used this as a platform to display the size and reach of RIL among the stock-market fraternity and it was executed with a lot of pomp and show. Old-timers vividly would remember the AGM in 1985 at Cooperage Football Ground, with over 12,000 shareholders in attendance. With the failing health of the patriarch and, in the post-Dhirubhai Ambani, the ensuing family separation, the AGMs became routine affairs till Jio was launched and the third generation had to be introduced to the shareholders. 

With the new generation coming to fore, this platform was utilised to announce new products, launches as well as long-term vision statements. Mukesh Ambani had stated in the 2010 AGM, just after the family separation, “Reliance Industries will create as much enterprise value in the next 10 years as it has done in the last three decades”. 
 

Till about four years ago, this seemed an empty promise, but now he has delivered it with RIL becoming the first Indian Company to cross Rs 12 trillion in market capitalisation (market-cap) and is among the top 60 globally by market-cap. The development has pushed Mr. Ambani to the sixth position on the world’s richest list. In 2019, he had promised to make RIL a net debt free company before March 31, 2021. He has more than achieved that goal already. 

The 43rd AGM held Wednesday had over 300,000 online viewers, possibly a record for any AGM. They were expecting Mr Ambani to throw light on the Aramco’s investment in the PetChem vertical, a road map for listing of Jio Platforms and Reliance Retail, launch timelines for 5G services and updates on Jio Mart. And the announcements made in the AGM did not disappoint and addressed most of the concerns.

Having achieved an almost impossible feat of raising over Rs 2 trillion in a pandemic-hit world, he had to formally announce that they are ending the current fund raise effort with Google having confirmed an investment of Rs 33,737 crore for a 7.7 per cent stake in Jio Platforms. With Google partnering with Jio, rumours about this US-based company investing with any of the other competitors will die a natural death.

The poster boys of the tech world – Sundar Pichai and Mark Zuckerberg – addressed the gathering. As an important peek into the future, Mr Mukesh Ambani talked about the 5G foray and how they have designed and developed a 5G solution from scratch and should be in a position to provide 5G as a solution to the global telecom players.

The younger generation – Isha and Akash – launched the Jio TV Plus, which has bundled all the streaming media players into a single platform with a single log-in. This has been a pain point for most of the binge watchers during this pandemic. They also introduced an innovation, Jio Glass, which seems to have stemmed from erstwhile Google Glasses, but with advanced features of 3D-like images aimed to take mixed reality to a different level.

Jio Mart was showcased as the next big revolution in the retail space where most of the brick-and-mortar biggies are currently struggling. Jio Mart can possibly turn the fortunes of the kiranas by providing them the omni-channel technology platform connecting them with supply chains of Reliance Retail on one side and with the neighbourhood customers on the other.   

The only disappointing piece was the proposed investment by Aramco in the PetChem vertical, which could take longer due to disruptions in the energy market. However, Mr Mukesh Ambani spoke about the way ahead for the energy business through repairing and restoring the carbon cycle and concentrate on new energy and new materials such as hydrogen cell. This AGM surely couldn’t have ended without the mention about the contribution of the group to fight the Covid-19 pandemic and appreciation of the efforts of the Covid warriors.

The key takeaway for investors from the announcements is that most of the action seems to be done and over with for now, and we need to wait for the execution to happen, especially for 5G and Jio Mart initiatives. The Aramco deal, too, may not see the light of the day. Thus, most of the excitement could be over for the time being and we may need to brace for a period of comparative inactivity on the news front from the RIL stable.

In the stock market, there is never a limit on expectations, even as RIL's competitors have a dull day on its AGM. This time, however, RIL stock failed to hold on to the high point of the day.

Ambareesh Baliga is an independent market analyst. Views are personal.