Mukesh Ambani’s Reliance Industries steps up M&A in retail and renewables push

Indian tycoon Mukesh Ambani’s Reliance Industries spent nearly $1 billion in the first quarter of this year investing in renewable energy, fashion and e-commerce 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 largest renewable energy portfolios in the country. It is also fend off challenges of Amazon and Flipkart, owned by Walmart, in the retail sector.

Reliance trading in the first quarter of the year hit a three-year high with 10 deals, according to Refinitiv data. Two of those deals, worth a combined $330 million, were to strengthen Reliance Retail’s e-commerce platform, with investments in delivery startup Dunzo and robotics company Addverb, which is expected to help Reliance to automate your warehouses.

Reliance Industries reported annual revenue of $102 billion on Friday, a record for an Indian company. In the quarter ending March, it posted a net profit attributable to company owners of Rs 162 billion ($2.1 billion), an increase of 22.5% from the same period last year which has yet to reach analysts’ forecasts.

“Traditionally, Reliance has always been based on building scale and expertise in-house,” said Probal Sen, a research analyst at ICICI Securities.

“That’s been a significant shift in strategy over the last three or four years, where they’ve been more than happy to acquire capabilities, technologies or infrastructure that they don’t have themselves.”

Sen added that Reliance could finance big bets on technology thanks to its triple B plus credit rating, better than India’s triple B minus sovereign rating. He said Ambani enjoys “absolute carte blanche” from investors who “don’t really pay attention to short-term performance indices.”

The group’s biggest investments last year came from Reliance Industries, home to the oil and petrochemicals unit that has traditionally generated the conglomerate’s profits. Last June, he launched a ambitious investment plan of 10,000 million dollars to diversify away from fossil fuels.

Ambani said Reliance planned to build four gigafactories on 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 fiance in 2020 to become “net carbon zero” by 2035.

Sodium-ion battery designer and manufacturer Faradion was one of Reliance Industries’ biggest acquisitions in 2021, at £100m, plus £25m in investment. Reliance intends to use UK-based Fradion’s technology in its battery factory to store energy, with the aim of making batteries for use in vehicles.

Faradion had not initially sought a buy. “We were more running a fundraising or investment process, and then from there [Reliance] seduced my investors with an attractive offer,” said James Quinn, CEO of Faradion. Reliance “moved very, very fast,” Quinn recalled. “I think it took about 45 days from the term sheet to the signing.”

The deal made sense for both parties, Quinn said. “What Fradion does really well is innovate and advance technology. What Reliance can do really well is large-scale industrialization, building very large factories, and doing it profitably.”

Although Reliance Industries spent the most money in 2021, subsidiaries Reliance Retail and the Jio telecommunications unit also made acquisitions.

In January, the venture arm of Reliance Retail paid $200 million for a 25.8% stake in Dunzo, the e-commerce delivery company. Although Reliance Retail is already the largest retailer in India, it wants to sell more products online.

“We believe there is massive collaboration that we can do directly in the Reliance Retail supply chain,” said Kabeer Biswas, co-founder of Dunzo.

“For every dollar of gross merchandise value we generate, 30 to 40 percent could come directly from Reliance Retail’s sourcing pipeline.”

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