The US$20 billion (approximately 15 billion rupees) funding frenzy may bring India’s Reliance closer to its dream of becoming a digital giant, further threatening the ambitious plans of American companies such as Amazon, Wal-Mart and Zoom in India.
The equity sale of Jio Platforms, Reliance’s digital arm, has attracted not only private equity and sovereign wealth funds, but also Google and Facebook, which strongly recognizes a company that focused on oil refining until a few years ago.
Some industry observers equate Reliance’s digital plan (from online shopping and cloud computing to telecom and digital payment) with China’s Alibaba and Tencent, and Reliance itself calls it a “global peer”.
Reliance has a track record of disrupting rival businesses. With cheap smartphones and data plans, its telecommunications joint venture Jio defeated market leaders Vodafone Idea and Bharti Airtel in four years to become India’s largest telecommunications operator.
Billionaire chairman Mukesh Ambani said on Wednesday that Reliance will expand the e-commerce platform JioMart (connecting small retailers with consumers) to provide not only groceries, but also electronics and fashion goods.
Mayank Vishnoi of Singapore-based financial consulting firm Resfeber International said: “Jio Platforms not only has back-end infrastructure and development capabilities, but also has an expanding base of captive consumers.”
“The addition of new digital products for different industries will pose a threat to many large dominant players. Having strategic partners like Facebook and Google can prove that the Reliance game plan is real.”
The recent share sale made Reliance a foreign partner of JioMart, which was launched this year. Facebook’s WhatsApp sees India as its largest market, with more than 400 million users, and it will work closely to connect small retailers with JioMart.
“We will cover more cities, serve more customers in India, and expand to more categories,” Ambani said.
When asked about the potential impact on foreign companies’ looking to India, a local industry executive who advised U.S. multinational companies said: “You should be afraid of Amazon and Wal-Mart.”
To be sure, Reliance will face fierce competition from Flipkart from Amazon and Walmart, because both companies have strong funds and have established a complete warehousing and logistics supply chain in the country.
JioMart currently only provides groceries in 200 cities, while Amazon and Flipkart provide various products nationwide.
Walmart, Flipkart and Amazon did not immediately respond to requests for comment.
“A real threat”
Reliance also has approximately 11,000 stores in 6,700 cities, offering a wide variety of products. It also cooperates with more than 45 top international brands, including Tiffany & Co, Burberry and Jimmy Choo.
Two sources familiar with the matter told Reuters that Flipkart’s senior leadership has begun to pay close attention to Reliance and are concerned that Indian companies will have more advantages from a regulatory perspective.
The Ambani family is regarded as connected politically. Amazon and Wal-Mart are having trouble with supervision, and the Indian Prime Minister has been promoting self-reliance while the Indian government has been strengthening government supervision.
Reliance’s digital plan is not limited to e-commerce.
The company said on Wednesday that it will develop education and healthcare solutions through its JioMeet video conferencing tool, which has attracted 5 million users in a few days since its launch this month. The design of JioMeet is very similar to that of its rival, Zoom Video Communications in the United States.
Zoom said this month that it plans to invest heavily in India. When asked about Reliance, Zoom stated that it has experienced fierce competition in the past, but we “know what it takes” to become the platform of choice.
A US technical director in India said of Reliance: “This threat is real.” “So far, it has not changed the rules of the game, but this view may change in a year.”
© Thomson Reuters 2020
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