India’s richest man and his business empire are again the talk of India Inc
The sprawling and opaque endeavour is an apt metaphor for Reliance Group, the business empire that has made Mr Ambani Asia’s richest man. The conglomerate reported record profits in the fiscal year to March, stealing the limelight from a rival tycoon, Gautam Adani, whose businesses are on the defensive after an attack in January by a short-seller.
In the sectors where Reliance operates, it is dominant. Its Jio telephony unit went from nothing to 439m mobile customers, or 37% of India’s total, in seven years. It gained 1m users in February even as Vodafone, the erstwhile market leader, lost double that number. Reliance’s retailing arm has 18,000 stores, up from 12,000 two years ago, a digital marketplace and a logistics network. It sells everything from gadgets and groceries to garments .
Then there is Reliance’s core business: petrochemicals. It is less sexy than the much-trumpeted new-economy ventures, but more lucrative. Last year the group’s refining operations produced 56% of its total revenues and 59% of earnings before interest and taxes. Reliance is believed to be the single biggest beneficiary from India’s abrupt transformation into a huge importer of sanction-hit Russian oil and a leading exporter of refined products.
Yet Reliance’s ambitions have a flipside. It makes relatively little money from its operations. Though its return on capital is higher than for the Sensex as a whole, it has not exceeded 10% since 2007 . Last year it was 5%. Year-on-year revenue growth slowed in each of the past three quarters.
In the 12 months to March Reliance Industries’ market value fell by 18% in dollar terms, or $43bn. Among big Indian firms, only Mr Adani’s battered businesses and two, did worse. Reliance has since clawed back some of that. But it will take more than a snazzy cultural centre to impress investors.
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