When Reliance Industries Ltd (RIL) launched its Jio mobile telephony service in September 2016, it was like a cyclone making landfall. Existing rivals had no strategy (read: money) to stand before its initial free-for-six-months offer or its astute decision to go for a nationwide launch of the latest 4G VoLTE. The rivals were stuck with 3G, for which they had paid a bomb to get spectrum, or still testing 4G VoLTE in pockets.
Then, at the commercial launch in March 2017, when the “free” period ended, Jio offered rock-bottom tariffs for data. All this for the convenience of pre-paid connections, meaning no fixed monthly rentals. (Jio launched its first post-paid service only in June 2021.)
It was a rout.
RIL had been putting together a strategy for the group’s second entry into telecom for quite some time. It was fascinated by the story of China, where China Mobile had launched 4G services across the nation. When RIL launched 4G VoLTE nationwide, it did not give customers the 3G option. Rivals were still offering a choice of 3G or 4G SIM cards, which required users to upgrade their handsets.
VoLTE, or voice over long-term evolution, sends voice calls over the internet in packets, which makes it great for video calls or just talking while your social media apps refresh content.
For RIL, the Jio gambit was just another way it leveraged technology across businesses. In its traditional polyester business, it worked with DuPont to understand the nuances. If it was VoLTE for telecom, taking the standalone 5G (a network that stands alone without depending on existing infrastructure) was intentional since it leads to lower latency, better use of spectrum, and wider coverage.
AI It Is
Technology has been a key driver at RIL right from its days as a textiles company and later in petrochemicals and other sectors. Those who know RIL well say it is today “a technology company”. Tech drives its traditional oil-to-chemicals (O2C) business, the largest revenue contributor at 56% (almost `5.65 lakh crore out of over `10 lakh crore). Technology also drives its retail business, now at Rs 3.07 lakh crore. RIL’s tech business has hit `1.33 lakh crore in less than a decade.
At RIL’s August 2024 annual general meeting of shareholders, Chairman & Managing Director Mukesh Ambani mapped the path ahead: it was to be “a deep-tech and advanced manufacturing company.” What stood out was the repeated mention and emphasis on artificial intelligence (AI). Jio’s vision, as Ambani put it, was AI everywhere for everyone. “To achieve this, we are laying the groundwork for a truly national AI infrastructure. We plan to establish gigawatt-scale AI-ready data centres at Jamnagar, powered entirely by Reliance’s green energy, reflecting our commitment to sustainability and a greener future,” he said.
Ambani said Reliance was “the only company with such access to green power” and uniquely positioned to lead the transformation. The plan is to create multiple AI inference facilities across captive locations to scale up and support growing demand. Simultaneously, Reliance will partner with “leading global technology companies and innovators to bring the most advanced AI models, solutions, and tools to India.”
Four sectors—agriculture, education, healthcare, and small businesses—are expected to benefit the most from AI. It could be farmers using intelligent tools to conserve water, making accurate weather predictions, teachers personalising learning experiences, AI doctors being accessible everywhere, or small businesses using it to achieve high levels of innovation and productivity.
If 4G has transformed voice and data, 5G will be big in IoT. Company trackers say RIL can compete with information technology majors. Almost everyone has access to technology, but the challenge lies in adapting technology for one’s business. For RIL, getting it right is just one part of the story. The other part is scale, the real differentiator. “It produces the network effect, makes data ubiquitous, and, with lower costs, drives down unit economics. In the absence of scale, all this is not easy to achieve,” they say.
At the AGM, Ambani said Reliance was targeting “doubling its revenues and Ebitda over the next three to four years.”
The Old And New
In terms of RIL’s business portfolio, a peek into the old and new provides perspective. Apurva Sheth, Head of Market Perspectives & Research, Samco Securities, says RIL has effectively navigated the transition. “While its core O2C segment remains a key revenue driver, its growth has plateaued due to fluctuating oil prices. This has led it to explore new avenues with broader growth potential, such as telecom and retail, where it is a market leader,” he points out.
A strategic spin-off of its financial services business (to create Jio Financial Services) and partnerships with global private equity firms “reflects its adaptability”. In the AI piece, Sheth looks at the recent meeting between Mukesh Ambani and Nvidia’s CEO, Jensen Huang, to highlight “RIL’s focus on deploying AI across Jio’s services.” From an overall strategic perspective, he thinks RIL has effectively diversified beyond its traditional business, focussing on growth, tech, and leadership transition.
That significant shift towards becoming a full-fledged tech entity is now core to the company. Sheth looks at the telecom and retail sectors, where RIL is a key player, with industry decisions centred on technological integration and diversification. “Telecom companies have invested heavily in broadband and 5G infrastructure, allowing them to expand into entertainment services like OTT platforms, gaming, and smart home solutions. This shift has increased customer retention and revenue streams,” he says. In retail, a concerted shift towards digital platforms, e-commerce, and omnichannel strategies has resulted in strong growth. “Innovations like hyperlocal deliveries and collaborations with fintech companies have improved customer convenience and engagement,” says Sheth.
Gaurav Dua, Senior Vice President and Head of Capital Market Strategy, Sharekhan by BNP Paribas, views RIL as an example of a well-planned and successful transition of a large conglomerate. “It has effectively utilised the free cash flows from its traditional businesses of oil and chemicals to build world-class companies in retail and telecom/tech segments. Now, they are venturing into other fast-growing verticals like financial services, renewable energy, AI infrastructure, and related services,” he says. Minority shareholders are “eagerly waiting for value unlocking in retail and Jio,” he says.
Going Green
The move into renewable energy is easily RIL’s most ambitious venture, with big-ticket investments in technology lined up to keep pace with what’s happening globally.
Jigar Shah, Head of Sustainability Research at Maybank Investment Banking Group, identifies RIL’s entry into renewable energy as a “mega opportunity” where the company can use its manufacturing prowess very effectively. “This is where areas like electrolysers and battery energy storage systems will come into play,” he says. This business, to most people, is still unknown, and those familiar with RIL are clear that a historical understanding of chemicals and manufacturing with scale could position it very well.
If one looks at carbon capture, RIL, using high-powered tech, can use that in other industries. “This is highly capital-intensive when looking at it from a scalability point of view,” explains Shah. Besides, RIL has announced a $10-billion investment in a manufacturing ecosystem and aims to produce green hydrogen at $1 a kg against the average of $4 a kg. “RIL will be a tremendous energy provider as the world takes those big steps in renewable energy.” The expectation is that, by 2030, many of these projects will be a lot more viable. “It is moving towards becoming a necessity and with the scale of projects like data centres, RIL’s businesses become a base for captive consumption and a sound understanding of technology will make a difference.”
Success with telecom has helped in using tech effectively in areas such as retail and laying the foundation for new energy.
Company trackers outline three big opportunities—higher infrastructure spending, higher discretionary spending, and a growing base of consumers. “RIL is well-placed with its understanding of energy-intensive areas, materials, and the ability to serve a large consumer base,” one such observer says.
Getting the formula right on the telecom vertical built Reliance’s prowess on technology. That could build the company’s competencies in renewables, even though it is a different business.
AI and the work done across RIL’s businesses have improved predictability outcomes. Using green energy in some projects has already seen costs far lower than fossil fuels. “With AI in refining, petrochemicals, and renewable, for instance, one can derive insights to ensure overall operations are far more predictable,” said the observer.
The future path is clear: RIL will focus most of its time and attention on newer technologies. The new RIL is right here.
@krishnagopalan
