Indian tycoon Mukesh Ambani’s Reliance Industries spent almost $1bn in the first quarter of this year on investments in renewable energy, fashion and ecommerce companies as the conglomerate works to diversify away from fossil fuels.
India’s largest listed company is increasingly relying on acquisitions to fuel its expansion and take on Gautam Adani, an industrialist with one of the country’s largest renewables portfolios. It is also fending off challenges from Amazon and Walmart-owned Flipkart in the retail sector.
Reliance’s dealmaking in the first quarter of the year hit a three-year high at 10 deals, according to data from Refinitiv. Two of those deals, worth about $330mn combined, were to strengthen Reliance Retail’s ecommerce platform, with investments in delivery start-up Dunzo and robotics company Addverb, which is expected to help Reliance automate its warehouses.
Reliance Industries on Friday announced annual revenues of $102bn, a record for an Indian company. In the quarter ended March, it posted net profit attributable to company owners of Rs162bn ($2.1bn), a 22.5 per cent rise over the same period last year that still missed analyst forecasts.
“Traditionally, Reliance has always relied on building up scale and expertise in-house,” said Probal Sen, research analyst at ICICI Securities.
“That’s been a significant change of strategy over the last three-four years, where they have been more than happy to acquire capabilities, technologies or infrastructure that they themselves don’t have.”
Sen added that Reliance could finance huge bets on technology thanks to its triple B plus credit score — better than India’s sovereign rating of triple B minus. He said Ambani enjoys “absolute carte blanche” from investors “not really paying attention to return ratios in the short term”.
The group’s biggest investments last year came from Reliance Industries, home to the oil and petrochemicals unit that traditionally drove the conglomerate’s profits. Last June, it launched an ambitious $10bn investment scheme to diversify away from fossil fuels.
Ambani said Reliance was planning to build four giga factories across 5,000 acres at its Jamnagar refinery complex in Gujarat to make solar panels, batteries for energy storage, electrolysers to produce hydrogen and fuel cells to convert it. These are supposed to help offset emissions from its fossil fuel business, after Reliance pledged in 2020 to become “net carbon zero” by 2035.
Sodium-ion battery designer and maker Faradion was one of Reliance Industries’ biggest 2021 acquisitions, at £100mn, plus £25mn in investment. Reliance intends to use UK-based Faradion’s technology at its factory for batteries to store energy, with the goal of manufacturing batteries for use in vehicles.
Faradion had not initially sought a buyout. “We were more running a fundraising or investment process, and then from there [Reliance] seduced my investors with an attractive offer,” said James Quinn, Faradion’s chief executive. Reliance “moved very, very quick,” recalled Quinn. “I think from term sheet to signing was about 45 days.”
The deal made sense for both sides, said Quinn. “What Faradion does really well is innovate and advance the technology. What Reliance can do really well is large-scale industrialisation, building very big factories and doing it cost effectively.”
Although Reliance Industries spent the most money in 2021, subsidiaries Reliance Retail and telecoms unit Jio also made acquisitions.
In January, Reliance Retail’s venture arm paid $200mn for a 25.8 per cent stake in Dunzo, the ecommerce delivery company. While Reliance Retail is already India’s biggest retailer, it wants to sell more merchandise online.
“We believe there is massive collaboration that we can do directly into the Reliance Retail supply chain,” said Kabeer Biswas, Dunzo co-founder.
“For every dollar of gross merchandise value that we drive, 30-40 per cent could come directly from Reliance Retail sourcing pipeline.”