COVID-19 offers Reliance an opportunity to become India’s national champion

Posted by GlobalData

Following the news that General Atlantic has paid US$870m for a 1% stake in Reliance Jio Platforms, the telecoms subsidiary of India-based Reliance Industries;

Laura Petrone, Senior Analyst at GlobalData, a leading data and analytics company, offers her view:

“Amid the global pandemic, foreign investors see Reliance as one of the most appealing companies in the Indian tech market. The conglomerate has raised around US$9bn over the last month by selling stakes to big investors, including Facebook, Silver Lake, and now General Atlantic. This money will support Reliance’s plan to use the Jio network to integrate its retail and ecommerce operations and build a digital empire. COVID-19 will accelerate Reliance’s move into India’s market for Internet services, like e-commerce and video streaming, as data traffic and online sales have expanded during the lockdown.

“In GlobalData’s India Tech Thematic Ranking, Amazon, Reliance and Netflix will lead in the COVID-19 theme, which allows them to capitalize on their strong position in ecommerce and video streaming. On the other hand, COVID-19 will have a negative impact on Facebook, as the social media giant is being hit by falling ad revenue.”

“Reliance’s launch of Jio Mobile data plans – which offered free 4G for the first six months of its operation – in 2016 helped shape a digital revolution in the country, with Indian customers consuming about three times the amount of data of an average European user. However, Reliance which spent tens of billions of dollars building out Jio now needs to pay off its debts. The new investments will allow the conglomerate to do just that, as well as focus on the digital part of the business, which is the most promising. While the oil refining business still accounts for the bulk of the company’s revenues, it has been hit hard by the fall in oil prices and demand.

“Mukesh Ambani’s company will not be the only company to emerge as a winner from COVID-19. The recent partnership between Jio’s ecommerce platform (JioMart) and WhatsApp, which has more than 400 million users in India, will give Facebook privileged access to India’s heavily regulated ecommerce and mobile payment sectors. JioMart will also help the US giant access the huge network of small convenience shops, which have delivered essential packages during COVID-19. Foreign players in these segments, including Amazon, Alibaba’s Paytm, and Walmart’s Flipkart, will need to carefully watch this dangerous alliance.”

—CT Bureau