Reliance 44th AGM flags move from Big Oil to Green Energy

Ambani has one more sweetener for shifting from 2G to 5G. It also announced a 5G partnership between Jio and Google Cloud. This will enable 5G mirroring connections in India with download speeds in excess of 1GB per second (1GBPS).

June 25, 2021 9:54 IST | India Infoline News Service
More than a month ahead of the AGM, Mr. Mukesh Ambani had publicly stated that the future of energy in India and at Reliance had to be green. His message was that while fossil fuels had largely fired up the bottom line of Reliance group over the years, it was time for a strategy shift. Therefore, it was already expected that the 44th AGM of Reliance Industries would be heavy on new green energy initiatives.

There were more expectations like the launch of the JioPhone in collaboration with Google, a dedicated operating system for India and a lot more. But every AGM of RIL has an underlying theme; and the theme of the 2021 AGM was “Big Oil to Green Energy”.

Reliance Industries – Build-up to the AGM
Data Source: NSE
The RIL stock has clearly underperformed the Nifty since the start of 2021 as the other heavyweights had taken rotated leadership. The uncertainty surrounding the stock was on the back of absence of triggers. In the last 5 years, there had been big stories at each AGM like launch of Jio, growth of Jio market share, massive monetization of digital, fund raising via rights, emergence of digital / retail as value drivers and above all, the grand plan to become zero net-debt. Nor surprisingly, a lot of hopes were being pinned at the 44th AGM on the shift to green energy. And shift it did!

Aramco deal to finally see the light of day

The $15 billion deal to sell a 20% stake in the Reliance O2C business was first announced at the 42nd AGM in 2019. A lot has changed since then. COVID-19 happened, global oil prices crashed and deal valuations had started looking steep. Even as Aramco was dragging its feet, Reliance went ahead and executed its debt reduction plans by hiving off stakes in the retail and digital Jio businesses. Now, the Aramco deal may be about to fructify.

The induction of Yasir al-Rumayyan on the board of Reliance Industries is indication that the Saudi Aramco stake in Reliance O2C is happening. Reliance has also confirmed that the deal with Aramco would happen during the current year. In fact, Ambani also made a cryptic call to shareholders to keep an eye on the international forays of RIL in the near future. That could be the space to watch out for.

Big shift to green energy

In a way, the stake sale to Aramco will provide the fuel for the shift to green energy. Over the next 3 years, Reliance plans to invest up to Rs75,000cr into new green energy initiatives to undertake a quantum shift in how Reliance approaches the energy business. Broadly, the intent is that by 2035, the Reliance group as a whole becomes carbon neutral.

Out of the Rs75,000cr budgeted, RIL will invest Rs60,000cr to set up 4 giga factories with focus on production of solar cells, solar modules, fuel cells, energy storage batteries, green hydrogen etc. In line with the Modi government’s green energy initiatives, RIL proposes to build 100 GW of solar capacity by 2030. The shape and colour of the energy conglomerate could be substantially different over the next decade.

Digital goes JioPhone and Jio goes 5G

Any Reliance AGM is almost incomplete without big bang announcements on digital. The much-anticipated “JioPhone Next”, in collaboration with Google, will see launch in Sep-21. It promises to be the cheapest smartphone with the maximum number of features including voice assistant, translation facility, read-aloud, high-end camera, augmented reality filters etc. While details are awaited, it is being touted as a breakthrough product to push 30 crore Indians from 2G to 5G in one single leap.

Ambani has one more sweetener for shifting from 2G to 5G. It also announced a 5G partnership between Jio and Google Cloud. This will enable 5G mirroring connections in India with download speeds in excess of 1GB per second (1GBPS). RIL has secured regulatory approvals and trial spectrum for 5G trials. This could be the missing link that RIL will fill to transport telecom users from 2G to 5G rapidly.

Positioning Reliance Retail among the global Top-10

Reliance Retail is expected to grow 3X in 5 years positioning it among the top-10 global retailers. While the company will expand its store footprint inorganically, there are also a number of organic shifts. Google Cloud and WhatsApp interfaces will be extensively leveraged to expand the retail footprint. Reliance Retail will also heavily invest in scalable warehousing to create the right logistics ecosystem. Above all, the real drive will come from the integration of the wholesaler, supplier, retailer chain as part of the retail cloud network.

To cut a long story short, it has been another ambitious rollout at the 44th AGM. How much of this would translate into enhanced valuations, is something for the markets to decipher. But one thing is clear that the green energy shift should surely be value accretive.

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