For decades, Mukesh Ambani’s empire has been supported by the energy flank he inherited from his father. But when Ambani faces shareholders at Reliance Industries’s annual meeting on Wednesday, he’ll be speaking on behalf of an empire that is increasingly breaking free from oil-price fortunes. The billionaire’s string of deals with Facebook and other Silicon Valley players this year have propelled Reliance into the e-commerce and technology space like never before.
The stock has more than doubled since a low in March to a record as Jio Platforms, Reliance’s digital services business unit, netted almost $16 billion in a fundraising blitz. All this at a time when sentiment in the oil market remains fragile even after prices have recovered from a two-decade low.
The flurry of deals for Jio have backed Ambani’s ambition to morph Reliance from an energy company to an e-commerce giant. They’ve also reduced oil’s influence on the company’s stock price. The company’s shares have a beta of 0.14 with Brent crude now, meaning a 1% weekly drop in oil causes no more than 0.14% fall in Reliance. This factor was as high as 0.7 during the 2008 meltdown, data compiled by Bloomberg show.
Jio is at the center of Ambani’s drive to create a homegrown version of Alibaba Group. The tie-up with Facebook has given the venture a Silicon Valley stamp of approval and has lured a dozen investors, enthused by the unit’s potential to shake up online retail, content streaming, digital payments, education and health care in a market of 1.3 billion people.
“Business-to-consumer sectors like retail and digital are more resilient to economic shocks,” said Harsh Dole, an analyst at India Infoline Finance Ltd. “These sectors fetch a premium return for valuation. The stock has been a beneficiary of that, no doubt.”