This article is divided into three parts and examines the rise of Mukesh Ambani as the chairman and managing director of Reliance Industries (RIL), the need for new growth engines within the company, and the future prospects for RIL as it looks to expand into the energy and retail sectors and continue finding new opportunities for growth.
1. The Rise of Mukesh Ambani
Reliance Industries (RIL), a leading Indian conglomerate, has seen significant growth and success over the past two decades under the leadership of Mukesh Dhirubhai Ambani. On the eve of Dhirubhai Ambani’s 90th birth anniversary, his son Mukesh and his wife Nita Ambani were seen cradling their newly born twin grandchildren. This picture was seen as the perfect family portrait and a representation of the success of the Ambani family.
Mukesh Dhirubhai Ambani has been the chairman and managing director of Reliance Industries (RIL) for two decades. During this time, he has overseen the growth and development of the company.
Under MDA’s leadership, RIL’s market capitalization grew at an annualized rate of 20.6%, revenues by a similar annualized 15.4%, and net profit by 16.4%. This shows the strong financial performance of the company during Mukesh Dhirubhai Ambani‘s tenure.
MDA inherited a cash machine in the family’s petrochemicals and oil refining group, but he saw the potential to transform RIL into a technology giant. To do this, he re-entered the telecom industry in 2010. This decision was seen as surprising by some, as it involved investing billions in a competitive industry when the average revenue per user was low.
Despite this, RIL’s foray into the telecom industry has been successful and has helped the company establish itself as a technology giant. RIL has partnered with major tech companies like Facebook, Google, and Microsoft and is now seen as a conglomerate that encompasses ExxonMobil, Amazon, Alibaba, Netflix, Google, and AT&T.
2. The Need for New Growth Engines
Despite RIL’s success and strong financial performance, MDA is in search of new growth engines for the company. This is because over half of RIL’s operating profits and the majority of its revenues still come from its legacy energy business, which is seeing single-digit returns on capital employed.
Weak refining and polymer margins, as well as a windfall tax on transportation fuels, are further hurting the company’s legacy petrochemicals and energy operations. This puts pressure on RIL to find new sources of growth and revenue.
In comparison to RIL, Adani Enterprises, run by billionaire Gautam Adani, is currently trading at a multiple of 393. This highlights the need for RIL to continue expanding and finding new opportunities for growth.
RIL shares are currently trading at below 40 times multiples and the company’s stock has largely been in line with the market, unlike the past 4 years when it contributed 30-40% to the total market rally. This suggests that RIL’s stock performance has been relatively stable, but there is potential for further growth.
3. The Future of RIL
Mukesh Dhirubhai Ambani’s youngest son, 27-year-old Anant, is expected to play a major role in the new energy business that RIL is building. This new energy business will focus on renewables and will be funded by the group’s digital business, Jio Platforms.
RIL’s digital business, Jio Platforms, has seen significant success and has attracted major investments from tech giants like Facebook and Google. This has helped RIL establish itself as a major player in the tech industry and has provided funding for the company’s expansion into the energy sector.
In addition to its digital and energy businesses, RIL’s retail business, Reliance Retail, has also seen impressive growth and is set to become the country’s largest retail business in terms of revenue in the next few years.
The future success of RIL will depend on its ability to continue finding and capitalizing on new growth opportunities. This means that the company must be proactive in identifying and pursuing opportunities for expansion and revenue growth. This could involve exploring new industries or markets to enter, as well as finding ways to differentiate itself within its current industries.
This could involve innovating new products or services, adopting new technologies, or finding unique ways to serve customers and meet their needs. By staying attuned to changes in the market and continuously seeking out new opportunities for growth, RIL can ensure that it remains a competitive and successful company in the future.
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