The timing is spot on for the eyeballing initiative. Jio Platforms Ltd., Ambani’s nearly seven-year-old mobile internet startup, is likely poised for an IPO — after global investors weathered the $140 billion plunge in debt-fueled rival Gautam Adani’s shares. Adani too has an ambitious plan for a consumer super app, although its priority now must be to stabilize its sprawling infrastructure empire. If Adani is distracted, Ambani’s burgeoning digital domain could get a step up.
Ambani and Adani. The two billionaires have adopted different playbooks. While Adani went headlong into public utilities, Ambani focused on private needs. Adani’s problem is that while Indians are clamoring for better roads, airports and more reliable electricity, most users are unable – or unwilling – to pay for the costly capital required to build new facilities. Again, in Ambani’s case, profitability is the underlying weakness that has forced the refining and petrochemicals conglomerate to focus on the consumer. Reliance’s legacy business churns out cash, but it requires lumpy investments that don’t generate a high return on equity.
Ambani’s consumer strategy is a hybrid of promotion, content and commerce. Of the three, the plan is secure for promotion as Jio Platforms has more than 430 million subscribers and the retail store, the country’s largest, has seen more than half a billion transactions in the last six months.
Establishing trade dominance will not be easy, however. Jio’s breakneck pricing deserves credit for India’s increasing smartphone penetration and proliferation of affordable data plans. But these supporting features have helped Amazon.com Inc. and Walmart Inc.-backed Flipkart attract middle-class Indian financiers in smaller cities. Unlike these e-commerce-only channels, Ambani’s “phygital” retail model is chunkier: It aims to engage the neighborhood grocer in fulfilling digital orders.
For this idea to work, Ambani needs to create demand for staple foods. His network of corner shops can deliver that most successfully. This is where the third pillar of strategy – content – comes into play. The tycoon tested the market by showing the soccer World Cup in India for free on JioCinema, with 32 million viewers tuning in to see the Argentina-France final. The experiment wasn’t exactly a smooth experience for viewers, but if the group can do better with the IPL franchise, big advertisers like local units of Unilever Plc and Procter & Gamble Co. will come with their checkbooks. More importantly, Ambani may want to use the free content to push his own house brands from groceries to cleaning fluids.
Ninety percent of Indian trade is conducted through convenience stores. Brands that control distribution networks made up of millions of small, independent stores generate some of the highest returns on investment among publicly traded companies. But this so-called general trade relies heavily on advertising to fuel demand. This is why free live streaming can be so important for Ambani. He can sell his own Good Life rice and Get Real shower gel, just like his father once sold polyester suits on Indian state television.
Silicon Valley has billions of dollars on Jio Platforms IPO. Back in the summer of 2020, Meta Platforms Inc. and Alphabet Inc. invested $5.7 billion and $4.5 billion in the deal, respectively. Other prominent California investors included Silver Lake Partners, Qualcomm Inc. and Intel Corp. Back then, it was a fast-growing franchise with a problem: Jio subscribers weren’t even paying $2 a month on average. The telecom company’s aggressive campaign to gain market share in India has kept pricing plans under wraps.
It changes. Jio’s recent revenue per user has grown to over $2 per month. The Indian mobile market is now reaching saturation levels – new subscriber growth is slowing down. According to Jefferies, Jio will hit 12-month EBITDA(1) near $9 billion in March 2025 with just 10% annual price increases for three years. Without the boost, Ebitda could be 25% lower. “This could significantly affect Jio’s valuation around the listing,” Akshat Agarwal, a technical analyst at Jefferies India Pvt., wrote in a Jan. 10 note.
When Meta, then known as Facebook, acquired a nearly 10% stake in Jio, it valued the franchise at around $66 billion. As of December this year, Jefferies estimates the company should be worth around $90 billion, including $22 billion in net debt. By the time Jio goes public in 2024 or 2025, current ongoing 5G-related spending would ease off. Once investors see net debt falling relative to a growing Ebitda, they could offer the existing group of Silicon Valley supporters an attractive exit. If they also envision a lucrative consumer staples business riding the carriages of telecom, they will open their wallets wider. For the latter narrative to take hold, free publicity to an audience held hostage by cricket may be key.
This year’s IPL will conclude in Ahmedabad at a stadium named after Prime Minister Narendra Modi, with two bowling alleys known informally as Reliance and Adani. Make no mistake: this is a competition between two rich, powerful men, neither of whom have yet proven why they deserve to win. A successful Jio fundraising following a flop of a public offering by Adani Enterprises Ltd. will take Ambani to the top, reversing a result that even favored the other magnates last year. Cricket, they say, is a game of glorious uncertainties.
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(1) Earnings before interest, taxes, depreciation and amortization.
This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.
Andy Mukherjee is a columnist for Bloomberg Opinion, covering Asian manufacturing and financial services. He previously worked for Reuters, the Straits Times and Bloomberg News.
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