The 43rd AGM of RIL may have just signaled a strategy shift
The 43rd AGM of Reliance Industries set off with huge expectations. To begin with, the markets were expecting RIL to make a bonus announcement. The markets were also awaited clarity on the journey towards becoming zero net-debt as well its future plans on the Jio IPO front. Above all, the markets were keen to know the latest status of the Saudi Aramco deal for the O2C business. While RIL may have skipped the bonus discussion and the JIO IPO, there were enough decisive cues in the AGM to signal the shift of Reliance from the old economy to the new economy.
Google adds to digital aura
When Google announced its $10 billion India Digitization Fund earlier in the week, few expected that nearly half of the allocation would go to Jio Platforms. The Google investment of $4.5 billion to pick up a 7.37% stake in Jio Platforms was significant in more ways than one. Firstly, it signaled that RIL was really looking to capture a big chunk of the digital ecosystem in India. Apart from a slew of PE funds that have invested in Jio Platforms, marquee companies like Facebook, Qualcomm and Google are looking at Jio for long term strategic partnerships. One can only envisage the impact on the Indian market when Facebook, Google and Qualcomm put their resources in combination with the reach of Reliance Industries. This is the first clear signal that RIL is reinventing itself as a real digital player.
What happens to O2C
The oil to chemicals (O2C) business has been the cash cow that has financed the massive telecom and digital foray of the Reliance group. Two important things happened at the 43rd AGM. Firstly, RIL announced its plans to approach NCLT to hive off the O2C business into a separate entity. This could be the first step for RIL to monetize its franchise in the hydrocarbons business. Secondly, RIL has not been too keen to negotiate and reduce the original price for the 20% stake sale in the O2C business to Saudi Aramco. That is because; RIL is already on track to turn zero net-debt even without funds from Aramco. RIL can afford to wait for an opportune time in terms of global crude oil prices and the gross refining margin levels.
Big news was about Jio
The AGM hardly had any guidance on the old economy oil and chemicals business. The future plans were all about the launch of Jio Glasses, Jio TV, the agnostic OTT super platform that would support Netflix, Amazon Prime & Hotstar. Reliance also spoke about its plan to launch 5G product solutions that will be developed indigenously. RIL also plans to give a boost to Make in India through the 5G route and compete with the likes of Huawei and ZTE. The moral of the AGM appears to be that Reliance has made a decisive shift to the new economy. It is over to markets now!
