Is Reliance Inorganic growth for Oil of Future?

Reliance Industries’ (RIL) mergers and acquisitions division has had a pretty busy. In the last 2 months (February 2019 – March 2019), the company India’s largest by market capitalization has closed 7 acquisitions deals and they also have done some IT base acquisition in 2018 and many of them are start-up which depend on external source of fund. at RIL’s 41st annual meeting (AGM), As Mukesh Ambani CEO of RIL said that the company will also create a hybrid online-to-offline commerce platform by integrating and synergizing Reliance Retail’s physical marketplace with telecom unit Reliance Jio Infocomm Ltd’s digital infrastructure and services. As, Ambani often said, “Data is the new oil”.

Devangshu Dutta, Chief Executive at Third Eyesight consulting, said, “More often than not, the small companies that produce innovative products. It is better done outside the existing infrastructure in a large company; that environment exists in startups.” Even Google, the world’s largest tech company, has acquired more than 200 companies.

Up until a few years ago, RIL was a predominantly an energy major India based company. While oil refining and petrochemicals remain the cash generating units, the largest publicly traded company in India by market capitalization and the second largest company in India as measured by revenue after the government-controlled Indian Oil Corporation. The company is ranked 148th on the Fortune Global 500 list of the world’s biggest corporations as of 2018. It is ranked 8th among the Top 250 Global Energy Companies by Platt’s as of 2016. Currently, 80% of the Reliance group’s sales come from its traditional oil and gas business.

On 27 December 2015 (on the 83rd birthday of Reliance Industries founder Dhirubhai Ambani) Reliance group’s introduce Reliance Jio Infocomm Limited (Jio), within 3 years they become 2nd largest is an Indian mobile network operator and simultaneously they enter in internet industry with different product with Jio brand such as Jio music, Jio cinema, Ajio, Jio payment bank, etc…

Just three years ago, anyone in Ramghat village of Arunachal Pradesh who wanted to apply for a job had to make a 20-Km motorcycle ride to a cyber café to apply the form. Today, Ramghat In papum pare district, not only has internet connectivity but also having 3+ e-commerce delivery services.

Internet industry in India has grown rapidly in the last few years. As of 2018, India internet user base was to be around 560Mn, which is just 41% of the total population of India. While the total number of mobile Internet users is expected to grow by 16% to almost 650Mn by 2020, and Data consumption is set to expand to around 7-10 GB per month per user by 2020 from the current 700 MB per month per user. The government and regulators have also taken several initiatives to boost the Internet ecosystem and provide start-ups with new opportunities.

According to the report of ET, Digital Economy of India, by 2025 expected to be $1 trillion as 18-23% of GDP .which is $413bn as 15-16% of GDP in 2018. Analytics India Magazine and INSOFE suggest that Indian analytics, data science, and big data industry is estimated to be $2.71 billion in revenues and growing at a healthy rate of 33.5 percent CAGR.

According to the Financial Times, affiliate sellers control over 80 percent of the Indian e-commerce market. It’s not only American companies like Walmart and Amazon who are heavily involved, but also Chinese big players like Alibaba and Tencent. And currently many of Indian startup are searching for investors. 

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With Reliance’s new found interest in fintech, and retail, currently the fastest growing sectors of the Indian economy, the company’s latest move shows that it is now fully prepared to take over the Indian internet market.

Unlike the first generation entrepreneurs, today, the Indian start-ups having the many sources of finance VCs, government funds angel investors, and even banks, debt funds, and NBFCs are also at their disposal. But in the new era changing and new age startups are looking to play this the old school way. Startups have understand that “Nothing is free even equity money”. While, today, still external funding is the main source of fund for a large number of startups remain dependent on for survival and growth. Many of these acquisitions are also examples of same.

On 23 February 2019 Reliance Industrial Investments & Holdings, a wholly-owned subsidiary of Reliance Industries has done an acquisition of 76% equity shares of Surajya Services (Easygov) with the cash Rs 18 crore. Easygov is focused on citizen-centric software solutions and services that help in improving convenience to people in accessing and digitally applying for Government to Citizen (G2C) schemes and services. And very next day on 24th Feb new news is Reverie is a cloud-based, language-as-a-service (LaaS) platform acquired at Rs. 190 Crore for the stack of 83.3%. Ambani says “that would work in collaboration with Reliance ecosystem for integrating its services in the various existing digital consumer platforms of the group.”

In a BSE filing on 2nd March, the Reliance Industries said that its wholly-owned subsidiary Reliance Industrial Investments and Holdings Limited (‘RIIHL’) will acquire equity shares of Grab A Grub Services Private Limited (‘Grab’) in a cash deal worth $14.9 Mn (INR 106 Cr). With this, Reliance will control 83% equity of Grab. And in a statement of Reliance Group, they say that “ The investment will support Reliance Group’s digital commerce initiatives and strengthen its logistics services, catering to both B2B and B2C segments.” Grab has delivered over 127 million orders across 49 cities. The client list includes McDonald’s, Flipkart, Amazon, BigBasket and Big Bazaar. It has offices in Mumbai, Delhi, Ahmedabad, and Bengaluru.

High-Performance Computing (HPC) software simulation services company that offered simulation services for manufacturing and Industrial companies such as, automobile, aircraft manufacturing, oil and gas, and semiconductor manufacturing and others. “Sankhya Sutra” is a Sanskrit for Numerical Algorithms. SankhyaSutra Labs were incubated at the Jawaharlal Nehru Centre for Advanced Scientific Research (JNCASR) in Bengaluru was acquired by Reliance Group on 04th Mar in Rs 16.02 Cr

The company will further invest an amount of Rs 82.04 Cr on 05th Mar for the acquisition of 82% stack in C-square Software Solutions, C-square and Reverie would help the company get connected to its local customers. The company provides software solutions, specifically catering to the pharmaceutical sector, for various functions such as cost and freight, distribution, retail, online e-commerce, sales force, and automation, the filing stated.

In this expansion FYND a Mumbai base Start-up also acquired on 10th Mar. Fynd Says It Is Not Getting Acquired By Reliance, At Least Not Yet The startup optimizes delivery time by sourcing products from the outlets nearest to the customer. It claims to have about 8,000 outlets on board for about 500 clients. The FYND app has had more than 10 million downloads and 1.5 lakh visitors on the website every month. According to Mukesh Ambani, the company’s e-commerce plan will be beneficial to consumers, retailers, and producers and will also help about 3 Cr small shopkeepers across the country. The company is expected to follow a hybrid model. Under this plan, the company is aimed at creating shared profitability by integrating the offline stores of 3 Cr small retailers via Reliance Jio, RIL’s online platform.

According to yesterday newspaper, on 3rd April Reliance acquire a chatbot (Artificial Intelligence) startup, Haptik Infotech Pvt Ltd (Haptik) 87% stake for Rs 700 Cr. In light of Haptik’s acquisition, it looks like Reliance is gearing up to create a complete ecosystem of products similar to Amazon Alexa’s ecosystem built for Jio’s vast subscriber base. Reliance believes voice interactivity will be the primary mode of interaction for Digital India. We are delighted to announce this partnership, and look forward to working with the experienced team of Haptik in realizing this vision for offering greater connectivity and rich communication experiences to the billion+ Indian consumers.”

According to Reliance With all these acquisitions currently they are preparing for their e-commerce plan, all this acquisition going to help directly or indirectly to better customer experience and also reduce their expenses of upcoming e-commerce business. This online platform was said to be an extension of Reliance Digital, the consumer durables and information technology unit of Reliance Retail. This announcement came in after recent reports suggested that the Reliance Retail is planning to use more than 5,100 Jio point stores across 5,000 cities and towns as delivery and collection points for its e-commerce venture. The initiative is expected to begin in April, this year. According to the report, the company has been planning to set up e-commerce kiosks at Jio point stores to allow the potential buyers to place orders online with the help of the store executives.

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But, it’s not only about the E-commerce

Currently, Reliance also expanding their business in the overall internet industry in India and also competing with different national as well as international brand such as in payment banking reliance competing with Paytm, Google, Amazon, PhonePe (Walmart) . Currently, Jio has begun live beta trials for its Jio Payments Bank and is testing services among its employees, replicating a strategy it employed with Reliance Jio Infocomm three years ago.  

In OTT Jio Cinema, has tied up with Disney and competing with Netflix, Amazon Prime Video and Hotstar.

In February this year, Spotify finally entered in the Indian market, Weeks later, YouTube Music stepped in as well, and Reliance, that now owns the JioSaavn app, has announced a 70 percent price cut to the service’s annual subscription cost. This means, from Rs 999 annually, JioSaavn’s year-long subscription now costs only Rs 299. And last few year Jio also launched more than 30 apps on app store related to different service.

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