Energy to retail: Reliance is India's reply to Exxon, AT&T, Amazon combined

BillionaireMukesh Ambani's Reliance Industries is India's answer to US giants Exxon, AT&T and Amazon - all rolled into one, Bernstein Research said on Tuesday.
"Reliance has disrupted the energy and telecoms industry in India and is on the cusp of doing the same to retail, fintech, and media," it said in a report adding the company has an enviable track record of innovation and execution.
For the oil-to-telecom conglomerate, energy remains core business and is expected to further expand as India is forecast to be the fastest-growing market for fuel and chemical products over the next decade, it said adding the company's partnership with BP of the UK and Saudi Aramco will support this.
Reliance owns the world's largest single-site oil refining complex and has multiple petrochemical plants. Three years back it forayed into telecom business and has reached 34 per cent share of market revenue.
"Based on the current net add run-rates it will likely reach 44 per cent share by the end of the next financial year," Bernstein said.
On its retail foray, it said Reliance is the offline leader with $18.5 billion of revenues coming from 11,000-plus stores. "The company is best positioned in New Commerce - digitizing the neighbourhood stores and in e-commerce (grocery/fashion categories)."
Also, fintech is another area in which Reliance is well positioned, it said identifying digitizing the kirana stores to accept digital payments and distributing mutual funds through Jio Money (payment app) as business opportunities.
Stating that media offers unique opportunities and synergies with telco, the analyst said Reliance has the dominant OTT platforms in India with content partnerships with Disney and Viacom.
"With activities spanning oil and gas, telecoms, retail media and fintech, Reliance is one of the most diversified conglomerates in India if not the world. There is simply no other company like it," Bernstein said. "In India, Reliance dominates energy, telco and retail in the same way that Exxon, AT&T and Amazon does in the US. But rather than three separate companies, Reliance comprises all three of these businesses rolled into one."

While Exxon is the world's largest publicly traded oil and gas company, AT&T is the world's largest telecommunications firm. Amazon is the world's largest online retailer.
Bernstein said Reliance has been unique in terms of entering new business areas and managing to achieve what the incumbent players and investors would never have thought possible. "This is a testament to Reliance management skills and ability to navigate some of the complexities which come with being a large operator in India."
While there have some failures, notably oil and gas production along the way, "what has impressed most is the strategic vision and execution ability of Reliance management to enter and 'win' in areas outside of core business," it said.
Over the past 10 years Reliance has undergone a transformation, which is almost unprecedented in corporate history, it said.
A decade ago 100 per cent of the EBITDA from the business came from energy-related business segments (refining, petrochemicals and E&P). This year FY20, the contribution from energy will fall to 64 per cent. "In two years (FY22), we expect that energy will fall below 50 per cent of the group EBITDA and by FY25, the energy-related business will account for around 30 per cent of group EBITDA," it said adding by FY23 telco will overtake energy to be the largest EBITDA contributing segment.
As Ambani embraced the new economy, Reliance sold out of the old economy - 30 per cent of upstream to BP in 2011 and an initial agreement with Aramco in 2019 for 20 per cent of the refining and petrochemical business).
The company, it said, could be a case study for other oil majors on how to evolve their business to compete in the low carbon world.

Sachin Bansal to be CEO again, buys majority stake in microfinance company

Billionaire Sachin Bansal is returning to an executive role, more than a year after he left e-commerce company Flipkart.
Bansal has picked up a majority stake in Chaitanya Rural Intermediation Development Services (CRIDS), a company which runs microfinance institution Chaitanya India Fin Credit (CIFCPL). He will be CRIDS's new chief executive officer (CEO), said a statement by his communications manager.

Bansal invested Rs 739 crore, roughly $104 million, in CRIDS: Rs 600 as primary infusion and the rest in buying out existing shareholders. His exact stake in the company is undisclosed.
“This acquisition is our entry into financial services,” said Bansal, in a statement. He added that CRIDS founder Anand Rao and co-founder Samit Shetty, will continue to be with the firm and spearhead their existing roles.
“Sachin brings with him the ability of building huge scale grounds up to CRIDS,” said Shetty.
CRIDS, which started in 2009, focuses on low-income borrowers for vehicle finance, housing loans, small business loans and education loans. It has 176 branches across 32 districts, and a total of 1,582 employees, according to the company’s latest annual report.
In FY19, it disbursed loans around Rs 800 crore in loans and had total assets under-management of Rs 567 crore. In the last fiscal, the company’s loan book grew by 61 per cent, with an active customer base growth of 32 per cent and a growth in average loan outstanding per client of 22%. Its net profit was Rs 7.25 crore, up from Rs 4.66 crore the year before.
Bansal is a co-founder of Flipkart, India’s most valued start-up, but sold his shares for $1 billion when Walmart took over the company. Little has been disclosed about his plans for CRIDS, a 10-year-old lender which focuses on rural, low-income customers in Karnataka, Bihar, Maharashtra, Jharkhand and Uttar Pradesh.
Bansal has dabbled in start-ups after leaving Flipkart. He has made debt investments in a variety of ventures like Vogo, Bounce, and Kissht and financing firms Altica Capital and Indostar Capital Finance. Some of these investments are from BACQ, a venture started last year with his IIT-Delhi batch mate, Ankit Agarwal.
Bansal’s biggest bet is Ola, where he committed to invest $100 million in January. A source close to the deal said the equity investment is around $25 million, while the rest is structured debt. Ather Energy, the electric scooter start-up, is another substantial investment where he has put in close to $35 million. He has over a dozen angel investment from his time at Flipkart and beyond.
Bansal’s bet in on CRIDS comes in the backdrop of the rise of specialised lenders and mobile payment companies. According to Boston Consulting Group, more than 1,000 fintechs have come up in India the last seven years.

Meet Pallonji Mistry, the billionaire who can't spend his own fortune

Billionaire Pallonji Mistry has about 84 per cent of his estimated $20 billion fortune locked up in a legal battle with India’s largest conglomerate.
The conflict between Mistry and the Tata Group began with a boardroom coup in 2016 when the former’s son was ousted as chairman of the latter. Mistry is one of the largest shareholders in Tata Sons Ltd., which controls the $100 billion conglomerate, and his family has since filed numerous lawsuits against the holding company’s board, alleging suppression of minority interests and governance lapses.

The courtroom battle has continued, most recently focused on a move by Tata Sons to restrict shareholders from freely selling their stake -- a change recognised by the government this month. Mistry, who derives an estimated $16.7 billion of his fortune from his 18.4 per cent equity in Tata Sons, can no longer sell those holdings without the approval of a board his family has been fighting for two years.
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Meet Pallonji Mistry, the billionaire who can't spend his own fortune Mistry’s Shapoorji Pallonji group didn’t reply to an email seeking comment. A Tata Sons spokesman declined to comment.
While Tata Sons has always been a closely held private entity, it was considered a public limited company due to its size under an old legal provision. That allowed investors greater flexibility in transferring their shares, according to Daizy Chawla, a New Delhi-based senior partner at law firm Singh & Associates.
The law was altered some years back, allowing Tata Sons’s shareholders to approve a change to its legal status last year, overriding objections from Mistry’s son.
“Being a private company there is now restriction on the free transfer of shares by its shareholder and the transfer needs to be done with the approval of the board of directors,” Chawla said.
A New Delhi court last week heard arguments on a plea to put on hold government approval of Tata Sons’s conversion. The dispute may eventually wend its way to India’s top court since the losing party will have the right to appeal.
Meet Pallonji Mistry, the billionaire who can't spend his own fortune The discord has battered a relationship that goes back almost a century. A Mistry company had financial links with Tata Sons from as early as 1927, though the family only began acquiring equity from the 1960s onward. Over time, purchases from Tata family members and a rights issue grew their holding to the present 18.4 per cent.
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Mistry inherited the stake from his father, who built the Tata Group’s automobile factories and steel mills. His Shapoorji Pallonji group, founded in 1865, is also responsible for some of financial capital Mumbai’s most iconic structures including the Reserve Bank of India buildings and The Taj Mahal Palace hotel.
After earning a reputation for being reclusive, Mistry and his family were thrust into the spotlight in 2012, when his younger son was chosen to helm the Tata group. The bonhomie ended with his son’s ouster in October 2016, which triggered one of India’s worst corporate showdowns.
Article 75
Another point of contention that’s emerged as the Tata-Mistry relationship soured is article 75 of Tata Sons’s articles of association, which the board can use to force a shareholder to sell out. This provision is also being contested in court.
Combined with the decision to go private, the restriction puts Mistry in a tight spot. On the one hand, he can be forced to sell his stake while, on the other, he needs Tata Sons to sign off on a suitor he picks.
“Tata Sons can choose to preempt any stake sale by enforcing article 75 in its articles of association and forcing an existing shareholder to sell out,” said Sudip Mahapatra, a partner at law firm S&R Associates. “That’s what’s putting the Mistry family on a weak footing.”