Mukesh Ambani has his task carved out for next 4 years; here’s how RIL will derive revenue growth

RIL is also looking to leverage the users’ digital footprint and earn incremental revenues from digital ads, digital lending and even engagements Image: Reuters

Mukesh Ambani’s next move could be to add a ‘layer of commerce’ to his Reliance Industries Ltd. (RIL), while looking to monetize the existing investments across different formats, said global investment bank, Bank of America (BofA) in a report today. RIL, the report added, already has a physical layer of retail shops across electronics, grocery and apparels along with the digital layer of Reliance Jio. The oil-to-telecom conglomerate recently bought key businesses of Kishore Biyani’s Future Group which gives it an unfettered access to a large number of outlets across the country. RIL also launched JioMart, its online retail offering, earlier this year.

However, this might not translate into direct upward movement for the stock price. “In the near-term we may see some time-correction (given recent outperformance); we find risk-reward favorable from a 12-month perspective and maintain Buy,” BofA said.  Comparing RIL to technology majors like Amazon, Alibaba, and Tencent, BofA said that Mukesh Ambani’s conglomerate has the potential to create shareholder value by owning the customer. “Due to their value proposition customers come back again and again to them (Amazon, Alibaba, Tencent). We believe RIL also has potential to do this. In fact RIL’s approach appears to be owning the “pipe” as well as the “services” offered on the pipe,” it said. In places where RIL fails to develop its dominance it could opt for collaboration or buying in startups in that space.

Additionally, the report adds that RIL will not necessarily earn every penny from the consumer focused business, but will also benefit from its digital layer. “ RIL is also looking to leverage the users’ digital footprint and earn incremental revenues from digital ads, digital lending and even engagements like play along with IPL, KBC etc,” it added. The overlay of digital layer over physical layer through an ecosystem approach; would help RIL monetize with a commerce layer.

Keeping the telecom industry’s tariff war ongoing, Reliance Jio could look at other avenues of shoring up revenue from users. Reliance has application offerings in the Entertainment, retail, gaming, and educational sectors which caters to a large number of audience. “RIL is also focusing on leveraging tech to offer Ed-tech, Health-tech, Agri-tech services. We also believe gaming will pick-up in India as the country has a young population mix with the world’s largest Gen Z workforce,” the report said. An omni channel approach on commerce would help RIL sell its grocery, apparel and electronics items to a wider audience base. BofA estimates that Jio’s digital advertising revenue could surge in the next few years, giving the company a 6-7% market share in advertising. 

Value for RIL could be derived if Reliance Retail follows the Jio Platforms model by offering stake to marquee global investors. The brokerage firm has a price target of Rs 2,355 per share on RIL from a year-long perspective.