InvestorQ : Do you feel that the retail business or Reliance Industries will now pay for the oil and gas business?
Neelam Naik made post

Do you feel that the retail business or Reliance Industries will now pay for the oil and gas business?

Answer
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Anu Biswas answered.
3 weeks ago


That is an interesting question and here are some very interesting points that you need to understand about the same.

· At the outset, it was oil and gas that funded the expansion of retail and digital so it is only logical that for digital and retail it is now payback time towards hydrocarbons.

· Since the year 2012, it was the refining and chemicals business that virtually bank-rolled the retail and digital business initiatives of the Reliance group.

· Now that both are in maturity mode, they need to stand up. Jio Platforms is the largest telecom player in India with 42% market share while Reliance Retail is 7-times the size of its nearest competitor, Avenue Supermarts.

· Big profits may still take time to build up for Jio Platforms and for Reliance Retail Ventures. However, they have the advantage of premium valuations in the business.

· That is why the Ambani family is now looking to see how digital and retail can pay back to oil, chemicals and other businesses with their valuation currency.

· Mukesh Ambani has outlined plans to convert the oil-to-chemicals or O2C business into a sustainable energy franchise. That calls for big investments and funds are needed.

· Clearly, digital and retail cannot bankroll as cash cows, but they can bankroll the O2C business with valuations. That is what we are seeing.

· Reliance has a strong life sciences franchise that has patented COVID-19 testing kits with high levels of efficiency. Here again digital and retail valuations can bankroll.

COVID has created big opportunities in APIs and CRAMS and RIL is most likely to fall back on its digital and retail valuation currency. That is also the right thing to do.