Reliance Industries: Growth spurt amidst pandemic
The giant conglomerate, Reliance Industries Ltd. has been keeping on par with the ongoing COVID-19 crisis whereas other companies are still picking up the pieces of their shattered growth. The increase in the domestic demand for internet and telecom services has led to the expansion of its telecom venture, Jio. This is followed by the complete payment of all its debt ahead of its self proclaimed deadline in March 2021, becoming net-debt free. The question that arises now is how are they keeping up with the situation?
On one hand, its share prices have been constantly increasing in value; while on the other hand, the company reported a 39% decline in its profits due to lesser demand for fuel. As reported via RIL ‘s annual financial report, the company suffered a one-time loss of Rs. 4,267 crores during the lockdown period of March and April.
Main causes:
The coronavirus did what demonetisation could not, that is, bring an influx in the digital payments in the country. In light of that, Jio came up with an online shopping platform, Jiomart — offering various services to people by capturing their internet-using audience. Additionally, there have been talks of combining Jiomart with WhatsApp and integrating its services on this platform. The kick start of internet 4G services in 2016 by Jio already created a large base of internet users in India; and with the current crisis, the need of a digital revolution has become even more evident.
Jio’s business grew at a rapid pace owing to a tremendous increase in viewership where the subscriber base, at the end of March, was approximately $387.5 million. Undoubtedly, RIL’s expansion strategy paid off well, where the downfall in its fuel business during the pandemic got covered up and lifted by its broadcasting and telecom business.
Increase in Foreign Investment
With a shift from the energy sector to the telecom sector, Ambani’s empire has become the centre of attraction for investment, especially from abroad. Recently, Google announced that it would spend $10 billion on digital development in India, over the coming years. This comes around the time when Ambani’s net worth surpassed Warren Buffet’s which now stands at $72.4 billion.
As a point of fact, Reliance’s massive upshoot is because of its 4G services that led to an accelerated internet usage nationwide. Further, the recent pandemic acted as a catalyst to boost the demand for internet services, making India stand at a very high chance for getting a digital do-over. The internet user base in India is still less than half of that of China and USA as mentioned by Morgan Stanley, making it one of the most sought-after sectors in terms of investment.
Also, The Government of India has been trying to make India a much easier nation to invest in which is evident by the fact that there has been an increase in the inflow of FDI, despite the slowdown in the economy, as reported by the secretary of DPIIT (Department for Promotion of Industry and International Trade).
All these factors along with the relaxation in the FDI norms and higher ranking in the Ease of Doing Business Rank have certainly made it more appealing for investors to step in.
Jio might have opened avenues and made it easier for people to access internet services, but we still have a long way to go. Even now, many regions are in a dire need of internet set up and digital modelling and hence, new changes are more than welcome! And with companies like Facebook, Google and Amazon, looking for investment opportunities in the country, we may hear major collaborations in the future.
References:
- The Economic Times
- Livemint
