Saturday, January 29, 2022

Ambani sold a dream for 27 billion dollars … and now he has to turn it into reality

Mukesh Ambani spent most of his time during 2020 trying to convince Facebook, Google, and other big companies on “Wall Street” with his ambitious plan, aimed at implementing the largest institutional restructuring in the world. He succeeded in obtaining $ 27 billion in investments to support the implementation of his plan, which added to pressure on him as investors awaited the success of his plan.

Recent press releases, and what has been reported by some people familiar with the company’s plans, show that the 63-year-old Indian businessman is focusing on transforming Reliance Industries Ltd. from an investment group operating on an old business model into a new giant in the field of business. Technology and e-commerce.

Among the most prominent development operations that Ambani will undertake is the participation in the implementation and development of the services of the fifth-generation telecommunications network, which is expected to start work within the next year, as well as the integration of the payment service through WhatsApp from Facebook with the company’s digital payment solutions. Reliance, as well as the inclusion of a nationwide network of small, medium-sized stores in the company’s e-commerce services. These initiatives coincide with the company’s continuing negotiations to sell Reliance’s oil and gas projects, as Ambani had hoped to complete the deal earlier this year, as he aimed to reduce the size of debts and finance his plan to develop the group’s technology services.

Each step is under a microscope

Investors are watching every step Ambani takes to restructure the market value of $ 179 billion, amid the repercussions of the Corona pandemic, and intense competition with major companies such as “Amazon” and “Wal-Mart”. The company’s share gains have diminished as investors await evidence of its ability to implement the restructuring plan, after the stock rose by 55% since the beginning of the year, to its highest level in September.

Nandan Nilekani, one of the founders of Infosys, which was founded in 1981 and is currently president of a $ 72 billion software service provider based in Bangalore, says, “It’s not clear yet … and there is a lot of work. Which needs to be done. “

Ambani announced his new partnership with investors including Facebook (there was a TV conversation with Mark Zuckerberg on December 15, during which they exchanged praise). Despite the huge funds obtained by the Indian businessman, these funds represented his alternative plan. He was mainly aiming to finance his plan by selling a stake of up to 20% of the oil and petrochemical sector in the “Reliance” company to “Aramco” in a deal worth up to $ 15 billion considering the value of the group’s investments in the sector amounting to $ 75 billion.

The deal was announced for the first time in August of 2019, as Ambani relied on completing that deal to get rid of his company’s $ 22 billion debt, which he had pledged to pay within 18 months. As talks with the Saudis stalled, investor anxiety increased, causing a sharp decline of about 40% in the company’s share market value over the three months to March 23.

You should start quickly

People familiar with the matter said that Ambani saw the need to speed up talks to sell a share of his digital services and retail units a few months before colliding with a wall that failed Aramco deal negotiations.

One of them indicated that the investor response has exceeded the company’s expectations, and reached the point where major companies such as KKR & Co, Silver Lake, and Mubadala Investment pledged more than $ 20 billion in financing to invest in The group’s digital services business, plus $ 6.4 billion in retail funding. This resulted in Reliance announcing that it would pay off all of the company’s debt in June, nine months ahead of its previously set deadline, thus supporting continued gains in the company’s stock.

The company’s ordinary general assembly meeting that took place last July witnessed Ambani and his sons Isha and Akash present to the shareholders their ambitious plan to invest in the field of advanced digital services. Among the new services that they have offered to shareholders: The launch of the fifth-generation communications network early next year, in addition to the launch of a unified television broadcasting platform that brings together dozens of channels under one umbrella that includes “Netflix”, “Disney +” and “Amazon Prime” service. For the video.

Ambani also mentioned that Reliance’s “Jio” platform is developing a range of digital solutions and applications that support the business of millions of small and medium-sized companies in India, stressing that the company seeks to expand its business outside the country after achieving penetration in the local market.

Ambani told shareholders, “It is time for India to be a world leader in technology, advanced digital services.”

People familiar with the plan’s details confirmed that Reliance’s priority is to launch the 5G communications network in 2021. However, the Indian authorities have not yet announced the auction to sell the rights to launch the next generation of that technology. “We will lead the 5G revolution in India during the second half of 2021,” Ambani added in statements to him this month.

Smartphone worth $ 54

A person familiar with the matter said, “Reliance” plans to present its work related to 5G services at the next ordinary general assembly, which takes place between July and September of each year. The company is also working with “Google” to manufacture and market a smartphone worth 54 dollars as part of its strategy to spread data services, video, and online games using the mobile phone in the Indian market.

According to an insider, the integration of the digital payments system with the payments system using the WhatsApp service will represent a critical step for Reliance in the development of its online shopping services in India. The company aims to benefit from millions of users of the platforms “Facebook”, “Instagram” and “WhatsApp” by integrating them with its e-commerce platforms.

James Crabtree, author of “Billionaire Rag: A Journey into India’s New Golden Age,” said Ambani’s biggest challenge right now is to generate returns on those investments.

Crabtree noted that the technology sectors in which Ambani aims to expand are witnessing much greater growth rates than the refining and petrochemical sectors, which still contribute the largest share of Reliance’s revenues.

Risks about the first man

Among the risks facing Reliance is the “first man” challenge, as Ambani is no longer young, while the company has not announced details of his succession to lead the group. The Indian newspaper Mint reported last August that Ambani, who is worth $ 77 billion, is working on establishing a family council to plan the succession of the group’s management and announce it by the end of next year.

“The reliance of large companies on one man carries a lot of risks,” said Cavell Ramachandran, executive director of the Thomas Schmidhaini Center for Family Enterprises at the Indian College of Business.

Supporters of Ambani’s plan point to his successes in bringing about major market change. Four years ago, he succeeded in changing the map of the telecom industry in India by offering the private telephone company, Reliance Jio Infocomm, free calls and cheap internet services, which bankrupted some competitors, and the company’s customers reached 400 million subscribers.

Confronting China

The Ambani empire may become one of the investment goals of the Indian government in the future, as it seeks to find solutions to confront the growing Chinese technology inside India, especially after the increasing border clashes that broke out between the two historical rivals during the current year.

Ambani has indicated on more than one occasion that the objectives of the Reliance Plan are in line with the strategy of the government of Prime Minister Narendra Modi, which seeks to find national solutions to bridge the growing digital divide the country.

Although Infosys founder Nilekani warned of the risk of the ruling early on with the success of the Reliance restructuring plan; But he was optimistic that Ambani could achieve that success.

“He has a wonderful ability to implement plans,” said Nilekani. “He looks at the big picture, and at the same time cares about all the small details, he looks like Jeff Bezos because both of them is an exceptional person who never gives up.”

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