The expectations from Reliance Industries’ (RIL) recent annual general meeting was not that upbeat and markets didn’t expect anything spectacular as many announcements relating to ‘green energy’ foray and other ‘big bets’ were already made in the last year’s shareholder meet.

However, a closer look at the proceedings and the recent annual report of RIL reveals a number of positive moves as well as a few apprehensions.

RIL’s resource allocation priorities and the charting of its existing and future businesses is interesting. Not so long ago, the company had all its revenue and profits coming from the oil and gas business. The strategy laid out a decade ago, reallocating resources on ‘big bets’ outside the core legacy business in the areas of retail and telecom, were viewed with cynicism.

With relentless focus on consumer businesses of retail and telecom, today oil and gas accounts for a mere 65 per cent of its revenue and around 55 per cent of its profits, before financing costs. The consumer led growth engines of retail and digital are now in full throttle; retail now accounting for around a fourth of its total revenue (and 10-12 per cent of the total profits) and digital with 10 per cent of the topline and 30 per cent of its profits.

To transform a product-centric organisation towards ‘high-growth’ consumer-led service-centric businesses is by no means an ordinary task. It calls for boldness and risk taking at the leadership level and enormous ‘execution prowess’ cutting across the organisation.

Building synergies

Primarily, three big developments stand out. First, the interlinkages that are being woven together, the logic of bringing together the retail and digital businesses and the synergies between them, is becoming clearer as we see it today.

RIL’s retail business has 15,000 stores, 40 million square feet of space and is a top 10 retailer in Asia. RIL’s recent acquisitions of fashion brands owned by Ritu Kumar and Manish Malhotra, the Sri Lankan innerwear company Amante and the Indian ethnic wear brand Kalanikethan are worth mentioning.

With one fifth of all retail transactions happening online in the country, large commitments have been made towards digital e-commerce in JioMart, making it multichannel capable. Investing around ₹1,500 crore to acquire Dunzo the hyperlocal grocery delivery company, is a classic example of such inter-channel synergies.

For example, consumers can today have the convenience of ordering grocery through WhatsApp (made possible by RIL’s strategic alliance with Meta), that will possibly get delivered through a Dunzo agent; well laid out synergies.

Again, on the digital side, early roll out of advanced 5G network, creating Jio Cinema and other content to be accessible through Jio phones using the Jio mobile and ‘wi-fi’ networks and paying through Jio payments app and thereby capturing a major share of an Indian’s wallet, end-to-end.

As the scale of its online and offline retail footprint is expanding, more private labels are being positioned to scale up its FMCG business. Noodles and snacks in the brand name of ‘Snac A’tac’ competing with the likes of Maggi and ITC crunches to ‘Yeah cola’ carbonated soft drink competing with the likes of Coke and Pepsi, and its recent acquisition of Campa Cola is taking this retail engine to the next level.

The e-commerce engine again is building capabilities on the B2B side, with RIL working closely with micro small and medium sized stores making their supply chains more efficient, providing face-lift for their physical stores and listing them on the JioMart platform on favourable terms.

Today, with more than 750 million Indians having access to internet, 65 million micro small and medium enterprises (MSMEs) being the bedrock of the economy, the chairman made a wise decision a decade earlier with his choice of businesses and displayed remarkable execution prowess to make it happen over the decade.

The second interesting development is the investments that continues to go into its legacy core refining and petrochemical O2C business, that is still generating a chunk of its topline, bottomline and cash-flows supporting growth of its new economy consumer-led businesses.

RIL is pledging close to ₹75,000 crore to strengthen its refining and petrochemical business and is foraying into new generation materials like carbon fibre and its composites. A healthy prioritisation between the current and future, especially to balance the cash-flows.

Third, RIL’s sustainability initiatives run very deep with large scale resource commitments. Be it adopting circular economy practices, decarbonising, or be it green hydrogen; especially with ESG becoming crucial, it is well aligned towards sustainability.

But there are apprehensions too; the initiatives embarked are highly ambitious. With diverse initiatives, each complex in its own right, that are cluttered and rolling up within RIL, investors would find it increasingly difficult to comprehend and track the performance of such initiatives, individual businesses and sub-segments.

Focused leadership teams with strong ‘domain specific’ experience will be needed in each business, steering and executing such ambitious plans; more importantly, such efforts needs to be visible to the investors.

The writer is Distinguished Professor Strategy & Accounting at the Great Lakes Institute of Management Chennai