Mukesh Ambani's succession, spinoffs in focus at Reliance's investor meet

By P R Sanjai

Mukesh Ambani’s once-a-year speech to investors has over time evolved into an eagerly-awaited pronouncement on his $222 billion empire akin to Warren Buffett’s annual letters to Berkshire Hathaway shareholders.

This year, Reliance Industries Ltd.’s investors will be looking for insight on Monday around the company’s 5G rollout, how he plans to unlock the value of his telecom and retail units through separate listings, and when and how his children will take over the reins.

Anticipation is high as the 65-year-old billionaire, who built Reliance into India’s largest company by market value and a powerhouse conglomerate has used the speech for a series of big announcements. These include the launch of his disruptive telecom service in 2016, Saudi Arabian Oil Co.’s proposed investment in Reliance’s energy business in 2019 and a strategic shift to green energy last year.

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This year’s shareholder meeting comes as the refining-to-retail group faces the twin challenges of a global recession and the blistering rise of Gautam Adani, who eclipsed Ambani as Asia’s richest man earlier this year and is emerging as an alternative power centre on the corporate landscape.

Reliance investors will have in mind how Adani’s conglomerate split its business into different listings years ago, unlocking value, and will expect “clarity and specific timelines for the next big things” from Ambani’s more-centralized holdings, Kranthi Bathini, equity strategist at WealthMills Securities Pvt Ltd. in Mumbai. Adani’s wealth has surged by $58 billion this year riding the stocks rally compared to the $3.3 billion rise in Ambani’s.

Here’s where investors are expecting news:

Succession

The patriarch signalled that succession planning atop Reliance will be expedited in last year’s shareholder meet and reiterated it explicitly in December. His three children -- daughter Isha and sons Akash and Anant -- are already holding various directorships in the group’s unlisted firms and are becoming more visible in their leadership.

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Ambani stepped down as the chairman of Reliance Jio Infocomm Ltd. in June, making way for his elder son, Akash, who took over the helm at India’s largest wireless operator. As rumours keep swirling around Ambani’s health, investors will look for more concrete steps to be taken in the leadership transition, with Isha, Anant and possibly his wife, Nita, taking on more responsibility.

5G Rollout

Reliance Jio Infocomm bought airwaves worth over $11 billion at a local spectrum auction as it sought to cement its edge over the smaller rivals -- Bharti Airtel Ltd. and Vodafone Idea Ltd. -- in the rollout of speedier 5G networks. That will be key to boosting revenues and luring high-value users.

Investors will be looking for proof of the pudding here. The technology is yet to return profits for Asian wireless operations despite investing billions of dollars, even for those in China which have been offering 5G service since 2019. Details like a nationwide rollout date, tariff plans for 5G services as well as where the demand lies for the service will be crucial for Reliance Jio to reveal.

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The Ambani children may demonstrate some of the key features of the 5G services at the meeting, just as they’ve showcased new telecoms products in the past.

Spinoffs, IPOs

The street has been waiting to get better clarity around the initial public offerings of Reliance Jio and Reliance Retail Ltd., especially after the two consumer businesses raked in $27 billion from marquee global investors in 2020.

Both companies are market leaders in their respective sectors with a formidable lead over their rivals. Their listings -- or even spinoffs -- could propel Ambani’s net worth. “The timelines are crucial to getting the mojo back for Reliance stock,” Bathini said. Reliance has gained just about 11% this year compared to the more than 40% rise by top performers in S&P BSE Sensex.

New energy, old energy

The $76 billion pivot toward green energy is the biggest transformation that Ambani is helming currently. It’s also a difficult transition given the conglomerate’s roots in petrochemicals and crude oil refining and the continued out-sized contribution of the fossil fuel-led businesses in Reliance’s yearly revenue.

Investors will look for updates on last year’s announced plans to build four giga-factories to make solar modules, hydrogen electrolyzers, fuel cells and storage batteries. Ambani has also been on a tear acquiring small green energy firms globally for expertise and technology. There are also plans to become among the world’s top blue hydrogen makers.

Going global

Ambani emphasized his vision for the “internationalization of Reliance” in his speech last year.

In the past year, Reliance has made overtures toward big overseas deals like a potential acquisition of the British drugstore chain Boots, which was never completed. Investors will want to see if the appetite for global acquisitions still exists amid a slowing worldwide economy.

Then there’s always the possibility of a curveball at the meeting, said Bathini. “Never underestimate the power of senior Ambani” to surprise the market, he said.