The Multi- Billionaire Business Tycoon Mukesh Ambani has finally moved one more step closer to building an e-commerce major for India. Mr. Ambani has plans to set up a digital-services holding company worth $24 billion. This company will become the main drive in his ambitious plan of dominating the whole country's Internet space for online shopping.
The Board members of Ambani's Reliance Industries Ltd has approved the proposal to invest a total of Rs 1.08 lakh crore ($15 billion) in the fully owned subsidiary company. This subsidiary will then invest this amount in the Reliance Jio Infocomm Ltd, the telecommunications venture of the Conglomerate. After a series of transfers of Capital, Jio will become almost free of debt by March 2020. Jio currently has a capital of approx Rs 65,000 crore, said the Board on 25th October in a statement.
This move by the richest man of Asia is the latest hint of the oil-to-petrochemicals group's movement towards the data and digital services field for more growth in the future. The company is going to build an online platform to take on the e-commerce major, Amazon.in as well as Walmart Inc's Flipkart Online Services Pvt. in the Indian internet shopping sphere. Mukesh Ambani, who is a 62-year-old Businessman told the shareholders in August 2019 that the upcoming new businesses, that includes retail business, are proposed to contribute nearly half of Reliance's earnings in the coming few years as against the 32 percent right now.
With the new holding firm, Mr. Ambani is also currently preparing his businesses for an Initial Public Offering (IPO). He has made a vow to complete this task within a period of five years from now. Since the year when the Reliance Jio's 4G network had been launched, the company has reached the top in the Indian market with over 35 crore users.You may like: Owner of TikTok made $7 billion in the first half of the year
Mr. Ambani has also been involved in binding together a proper network of partners. This has been done through various acquisitions and stake purchases to build a foundation for the plans to venture into the e-commerce market. "Given the reach and scale of our digital ecosystem, we have received strong interest from our potential strategic partners," Mr. Mukesh Ambani said in a report, "We will induct the right and deserving partners in our platform company, then creating as well as unlocking a meaningful value for the RIL (Reliance Industries Limited) shareholders."
The Reliance Industries will be investing this money in the holding company -- most likely the Alibaba Group Holdings Ltd and the Alphabet Inc. This investment will be made through optionally convertible preference shares. The unit will be acquiring the parent's equity investment of Rs 65,000 crore in Jio, as per the Reliance Industries.
After the equity infusion, Reliance Jio will be transferring the liabilities worth Rs 1.08 lakh crore to a subsidiary company of the parent. This will turn the Reliance Jio almost debt-free. But this will exclude the airwave-related liabilities of the company.
"The reorganization of Jio's capital structure is aimed to consolidate all of the digital assets under a single entity, thereby reducing the debt at this entity and most importantly, streamlining the structure to make it attractive for the eventual monetization," as said by the Citigroup in a research report.
While Mr. Jack Ma who founded Alibaba in the year 1999 from scratch, had been a former English teacher. Mr. Ambani is using most of his empire to build something similar for the Indian market. This will be done by connecting the retailers as well as the consumers.
Alibaba's market value is around $454 billion. The company has reportedly earned a total profit of $13 billion in the year to March, on revenue of approx $56 billion. The Chinese e-commerce giant's expansion has majorly included the mom-and-pop shops. This is a key segment that Mr. Ambani is also looking to tap. The Shares of Reliance Industries have increased 28% this year, as compared with an 8.8% gain in the benchmark S&P BSE Sensex index. The stock that had reached a nearly all-time high, will resume the trading on Tuesday, 29th October 2019 when the country will return from a holiday.
Mr. Ambani had said in a statement that in August 2019, Reliance Industries had spent around $50 billion on Reliance Jio, the company whose entered the Indian market with free calls and very cheap data options had pushed some of its rivals to exit the industry or end up in a merger in a consolidation that had shaken up the entire telecommunication industry.
The total debt of Jio had been about Rs 84,000 crore on September 30th, 2019, Mr. V Srikanth, the chief financial officer had said in a statement this month. The company had a stand-alone profit of Rs 990 crore for the quarter through September on revenue of Rs 12,354 crore.
The Business tycoon of India has a net worth of about $56 billion as per the Bloomberg Billionaires Index. The businessman has revealed his plan to sell 20% of the company's oil and chemical businesses to the Saudi Arabian Oil Co at an enterprise value of $75 billion. After spending billions of dollars for years on establishing new businesses, Mr. Ambani is finally cleaning up the parent’s balance sheet. He has planned on doing this to make the business free of the net debt is not more than two years from now.Also read: Government approves the merger of BSNL-MTNL; Allocation of 4G Spectrum