‘Ambani can make Reliance next Alibaba or Amazon’

Reliance Industries Ltd has the potential to evolve into a homegrown version of Amazon.com Inc, Alibaba Group Holding Ltd or even Walmart Inc, as it rapidly morphs from an energy company to a consumer giant.Helmed by Asia’s richest man Mukesh Ambani, Reliance can “become a unique quadruple play by bundling connectivity, carriage, content and commerce together to gain higher share of consumers’ wallet,” UBS analysts led by Amit Rustagi said in a January 24 note that analysed all the ingredients Reliance has to become the next e-commerce behemoth.Ambani’s ambitions of bolstering Reliance’s consumer businesses has led to about $44bn of investment in building the nation’s largest retail chain by revenue and a hugely disruptive telecom venture. He is now gearing up for what could be his toughest fight yet as Reliance prepares to enter the world’s fastest-growing major e-commerce market, where Jeff Bezos and Walmart have already committed huge sums.Reliance “can lead in telecom and media and gain significant share” in retail and its fledgling e-commerce operations, the brokerage said, upgrading its rating to ‘buy’. In the best case, the stock price could even double over the next three to four years, it said. Its shares have surged 138% since Ambani stormed into India’s telecom sector with free calls in September 2016.Since announcing his e-commerce plans last July, the stock has gained 26%, outpacing the 1% rise in S&P BSE Sensex.Ambani has plans to roll out Reliance’s online shopping platform to 1.2mn retailers and store owners in western India, joining Amazon and Flipkart in expanding aggressively.Reliance Jio Infocomm Ltd currently has 280mn telecom subscribers while its retail arm operates nearly 10,000 outlets across more than 6,500 Indian cities and towns.It’s also in the process of rolling out broadband fibre-to-home services.“Growth in retail and fixed broadband can surprise investors, like telecom did,” said the UBS report which outlined many similarities between India right now and China as it was 10 years ago.Low online penetration for e-commerce coupled with supportive domestic policies – the ‘home court advantage’ – should help Reliance, just like it did for Alibaba in its home country.Reliance’s consumer businesses will contribute nearly as much to the conglomerate’s overall earnings as its bread-and-butter energy businesses by the end of 2028, Ambani had told shareholders last year.There are concerns that Reliance’s rapid diversification into an ‘everything company’ is piling on too much debt in the balance sheet – a concern that the company plans to address in a year.Either way Ambani will be a tough rival, given he has so much to lose. “Companies that have to justify years of heavy investments in a foreign market often times will be less aggressive than a domestic one that has nowhere to go if it fails,” the UBS report said.