the big story

Mukesh Ambani’s fabulously productive pandemic

The TL;DR: While the economy is in tatters—as are our wallets—India’s richest man unveiled his coup de grace at Reliance’s annual meeting: A $4.5 billion investment by Google. This is just the latest in a recent deluge of big-bang investment moolah—all of which is going into Reliance’s golden child, Jio Platforms. The likely end result: Jio will soon become intertwined in almost every aspect of our daily lives.

So why is everyone rushing to dump money in Mukesh-bhai’s pockets? And why are they doing so when the Indian economy is set to shrink by 5% or more? We answer these and other puzzling questions.

First, an explanation

Before we jump in, let’s tell you about Jio Platforms. 

• It all started when a company called Infotel Broadband Services Limited won a pan-India license to deliver broadband services back in 2010. 
• Soon after, Reliance took a 95% stake in the company—even as its rivals cried foul. 
• In 2013, IBSL got a new name—Jio Platforms—and launched its first big product, Jio 4G services, in 2016.
• It is now a mega-platform that spans every digital service that Reliance provides—be it shopping, entertainment or telecommunications.

The big vision: Mukesh-bhai is quite simply building a monster-platform that offers every service offered by every global tech company—be it WhatsApp, Amazon or Netflix. As Mint notes:

“By providing Indian consumers access to everything from groceries and clothes to banking and home automation via an integrated system running through Jio, Ambani hopes Reliance can become what he calls an ‘everything company.’”

Got it! So what was the big news yesterday?

The key highlights are as follows:

Google’s mega check: Earlier this week, CEO Sundar Pichai announced a $10 billion Digitization Fund for India—aimed at increasing digital access to all Indians. We learned on Wednesday that nearly half of this money will go to Jio Platforms—primarily to create a cheap 5G Android smartphone. 

Pichai positioned the investment as a do-good move in a tweet: “Everyone should have access to the internet. Proud to partner with @reliancejio to increase access for the hundreds of millions in India who don’t own a smartphone.” Aww, except many people didn’t view ploughing billions of dollars into the pockets of a single all-powerful company as particularly democratic. 

The real reason: An affordable Android smartphone will give Google access to tens of millions of Indian users for its family apps. And together, the two companies can topple cheaper Chinese brands like Xiaomi.

Point to note: Reliance Industries has sold 33% of Jio Platforms to investors for Rs 1.52 trillion ($20.22 billion). See: The timeline of investments from big hitters like Facebook, Microsoft and Intel.

Jio TV Plus: Ambani also unveiled his plans to kick aside Apple TV with—what else!—a cheaper knockoff. You can access 12 key streaming platforms—e.g. Netflix, Amazon Prime, Disney Hotstar, Sony LIV—and the Jio App Store.

A ‘Made in India’ 5G: Ambani declared: “Jio has created a complete 5G solution from scratch, that will enable us to launch a world-class 5G service in India, using 100 per cent homegrown technologies and solutions.” ‘Homegrown’ will be key to defeating its Chinese rival Huawei—which has recently been banned by the UK, US and India for spying on behalf of Beijing. Reliance claims its 5G tech will be ready for trials next year.

Jio Glass: It looks like a pair of Ray Bans, but enables 3D immersive experiences—think virtual classrooms and meetings with holographic avatars. We don’t know when it will come to market, but you can check out the cool demo here.

Why is everyone investing in Jio?

For three main reasons:

The biggest daddy of them all: The Reliance empire dominates almost every industry: 

“Jio is India's leading telecoms carrier, Reliance Retail Limited is its top brick-and-mortar retailer, Reliance's Network18 Media & Investments Limited is one of its biggest news networks, and Reliance's Jamnagar is its largest oil complex. His empire also produces films at Jio Studios and runs India's top soccer tournament, the Indian Super League.”

It’s always easier to bet on the clear winner than the underdog.

Tech is the safest bet: during a pandemic—which has triggered dizzying demands for digitisation and connectivity. Thanks to the virus, almost everything is moving online. And Reliance has its finger in every tech-related pie in India—be it shopping (JioMart), messaging (tie up with Facebook/WhatsApp) or videoconferencing (hello, JioMeet). And it owns both the pipe (network) and everything that flows through it (products, services etc).

The sarkaar’s blue-eyed boy: Ambani has what biz papers coyly call ‘regulatory advantage’. Translation: The government really really likes Ambani—and has long given him preferential treatment. Reliance’s rivals, OTOH, have been subject to rule changes that often affect their ability to compete. For example: India rejected Walmart-owned Flipkart’s application to enter the food retail business. 

The government’s reason: it naturally favours Indian companies over outsiders like Amazon and Walmart—all in the name of an Atmanirbhar Bharat. But phoren paisa is fully welcome as long as it lines the pockets of a shuddh desi Reliance. 

The upcoming IPO: Ambani eventually plans to take Jio Platforms public—listing it both on the Indian and overseas stock exchanges. And that promises a very lucrative exit for its foreign investors.

But why India? Isn’t our economy going downhill?

According to a slew of predictions, the Indian economy is set to shrink anywhere between 5-10%. But according to Quartz, here’s why it remains a tech company’s wet dream:

• India has the world’s second-largest internet user base with 560 million internet users as of 2019—but that’s still under 50% of its total population. So the market opportunity remains huuuge!
• The reverse brain drain triggered by the pandemic will up the quality of tech talent in the country.
• The pandemic has also exacerbated rising hostility toward China. As governments around the world push back against Beijing and Chinese companies, India may seem a safer bet for US-based companies.
• And this slew of foreign investments may, in fact, help ease the projected damage wreaked by the pandemic.

The bottomline: Our favourite take on the Great Reliance Bonanza is this tweet by @ankitkr0: “It's Mukesh's India—Modi is just living in it.” As are we all. 

Reading list

• Mint explains the rush to invest in Reliance here and here. 
• Quartz (members only) explains why India remains a sound foreign investor bet. 
• Wall Street Journal reports on how Ambani single-handedly changed the digital landscape in India. 
• Vedica Kant delves into the origins of Reliance, and how it shaped the company it is today. 
• Vibhu Arya argues that despite the hype, India is selling parts of its companies to foreign investors and then leasing them back. 
• Business Standard explains why Reliance’s biggest challenge—execution—lies ahead. Related: Mint on the company’s patchy record on delivery targets.