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Mukesh Ambani takes a break from big investments; looks to accelerate cash flow from Jio

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Mukesh Ambani takes a break from big investments; looks to accelerate cash flow from Jio

Mukesh Ambani's speech lacked usual big project announcements and investment plans. He can't be blamed for it as the company is concluding its Rs 4-lakh crore capital expenditure cycle, which includes Rs 2.5-lakh crore for creating digital business and Rs 1.5-lakh crore for petrochemical and refining projects.

The annual shareholders' meeting of Reliance Industries (RIL) was electrifying this year, starting with chairman Mukesh Ambani announcing the beginning of 'Golden Decade of RIL' and his twin children Isha and Akash detailing the rise of Jio on the digital backdrop. Ambani's mother Kokilaben and wife Nita, who is on the board of RIL, were witnessing the AGM that turned into a celebration. Some shareholders jokingly said that Ambani's speech was like the union budget, covering education, healthcare, agriculture, digitisation and manufacturing.

But in a nutshell, the speech lacked the usual big project announcements and investment plans. He can't be blamed for it as the company is just concluding its Rs 4 lakh crore capital expenditure cycle -- which includes Rs 2.5 lakh crore for creating digital business and Rs 1.5 lakh crore for petrochemical and refining projects. Jio's business needs a little more capital as Ambani looks to reach the last mile, covering 99 per cent of India's population, while in petchem and refining it's in the consolidation phase.

RIL has been building the optical fibre cable network for the last four years and its new plan to build fixed-line JioGigaFiber is just an extension to the earlier one. Also, there is a reason for building the fixed-line services -- so far just 20 per cent of the network capacity of Jio is being utilised. More content consumption by the public is import for the company to increase its revenue and margins.

As one expert says, "If somebody was paying Rs 2,500 a month bill before the launch of Jio, it would have come down to Rs 500-600 now. Here RIL sees an opportunity to raise it further to earlier position, offering new services."

Another announcement is that three most popular apps -- YouTube, WhatsApp and Facebook -- will be available on JioPhone. Ambani, earlier, tried to battle the global app giants with JioChat, JioTV, JioCinema and JioMusic, but failed to match them and, finally, brought them into the Jio ecosystem.

For content creation, Ambani is depending heavily on RIL's media vertical, Network 18. The news, magazine, TV and cinema apps of Jio take the content feed from Network 18 group.

The chairman indicated about the third big platform that the company is building in New Commerce. "This platform has the potential to redefine retailing in India and become one of the biggest new growth engines for Reliance in the years to come," he says. Reliance Retail has already launched its e-commerce initiatives in a modest way through Ajio.com, RelianceSMART.in, RelianceDigital.in and RelianceTrends.com. The company would be looking to ramp it up across India.

His announcement on PET bottle recycling initiative is a way out when various state governments, including Maharashtra, are implementing plastic bans. RIL is merging its holding company in the US -- under which the struggling shale gas of business were incorporated -- back in the parent company. The gas production from the US shale gas assets of RIL was down by 19.7 per cent in the last financial year because of slowdown in development activity.

Besides, Ambani sees the current emphasis on renewables and electric vehicles business across the world as a threat to the transportation fuels business of RIL. For countering this threat, he has adopted a new 'Oil to Chemicals' strategy. RIL will increase the level of integration of its oil and chemicals business by adding new chemical chains and capacity to produce new materials and composites of high value.

Ambani expects that the earnings from RIL's consumer businesses would match with their hydrocarbon business (refining and petrochemicals) and it will proclaim the arrival of the Golden Decade.