Buoyant

The rise of Jio and sustained growth in refining and petrochemicals have fuelled the growth of Reliance Industries.

- Nevin John

Over the past six years, the Mukesh Ambani-controlled Reliance Industries (RIL) raised many eyebrows with its investment decisions. The company spent over ₹3 lakh crore to build the 4G business under Reliance Jio, and to integrate the refining and petrochemical businesses at a time when its humongous capital expenditure cycle was higher than its market valuation. While the expansion of the established businesses was justifiable, investments in the greenfield telecom venture – of over ₹2 lakh crore – stunned investors. Doubts were raised about the profitability of the telecom venture in a crowded and highly competitive market.

RIL faced a flurry of questions. Will voice over long-term evolution (VoLTE) work? (RIL was the first to venture into VoLTE technology in which voice calls are transmitted as packets, unlike in 2G or 3G networks wherein a certain amount of Onetwork bandwidth is assigned to pipe the call.) How affordable would data be? Is there a demand for data in India? Can people afford smartphones?

The scepticism was put to rest when RIL completed the first year of its 4G operations in September this year. Its average market capitalisation in the October 2016 - September 2017 period stood at ₹4.16 crore, up from ₹3.21 lakh crore in the October 2015 - September 2016 period. A 29.5 per cent increase in average market cap in this period has placed RIL at the second position in the BT500 ranking. On November 1, RIL’s market cap crossed ₹6 lakh crore, before settling at ₹5.8 lakh crore on November 20.

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