RIL's tech biz in much better position to scale up: Deven Choksey

There is going to be a significantly large amount of play as far as the speciality chemical business is concerned, says MD, KR Choksey Shares & Securities.

In a few years or even now is it fair to say that RIL will largely be a tech company?

If you look at RIL’s current structure, it would be a holding company under which they would have three different companies -- one of them would be O to C that means oil to chemical company for which they have got NCLT approval recently. They have Jio platform as a second company which is largely catering to all the technology-related stuff that we are talking about and then the retail company which is basically engaged in the business of retail.

Looking at Jio platform, you can say this as a technology platform as they have built a complete ecosystem on one side which is fibre to tower ecosystem. On the other side, they have built-in vertical wise different applications which are there in the eCommerce space, education, healthcare and gaming. They have already built up this vertical base approach and they are integrating content to these verticals and adding the transactions to it.

The company is already transforming into a transaction-based company where they have a revenue model to be generated from transactions as well as from subscriptions. We are looking at this company completely transforming into a technological play vis-à-vis a pure mobility play which most of the people have seen up till now.

In the beginning of its existence as a telecom player, Jio was largely burning a lot of cash to starve the other competitors of oxygen, that was the primary sort of strategy which worked and you have seen Jio in terms of numbers get on top. But what about profitability? What about earnings or are all of these investors looking at the future and seeing how big it could get?
It is a pertinent point. From the mobility platform, if you see the last quarter result, they have made an EBITDA of around Rs 2,500 crore which means the annualised EBITDA of around Rs 10,000 crore. This is coming from mobility platform on a base of around 38 crore customers and that too with ARPU of around Rs 120 which has the potential to go up.

On the other side, they have roll out the business model, the fibre to home has already been rolled out. Somewhere around 15 to 20 crore homes are ultimately going to get connected. The enterprise versions have started the activity with Jio Mart. Jio Meets will eventually come up and similar such kind of use cases will get developed for respective user classes and that will ultimately give the opportunity for the company to generate the revenue out of the subscription as well as from the transaction model.

There is mobility one side, fibre to home another and enterprise on the third end. Ultimately, when you see the convergence of all three, you will find the company would have probably created a significantly large potential to generate higher amount of revenue and the profits.

Somewhere in the financial year-end 2021-2022 on an annualised basis, the company should be in a position to report Rs 20,000 to 25,000 crore worth of EBITDA or Rs 5,000 to 6,000 crore EBITDA on a quarterly basis. Now given that kind of a financial situation which could possibly only go up in the subsequent period of time when your scale up is happening at a larger level, probably, you would see the company in a much better position to generate higher EBITDA. Today, the core business contributes around Rs 85,000 to Rs 9,0000 crore. At some point of time you want to see the businesses like Jio and the Retail contributing to the same level.

What do you make of the strategy to be able to have pivoted from a petchem business to a tech business and the timing of when it happened? At a time when lockdown and COVID have hit but crude supplies have started dwindling, the world has been moving towards greener options and technology has sort of invaded every space and sphere of our life. So do you think that kind of vision has really helped position RIL where it is today?
Yes, on one side you have the consumer-facing businesses call it Jio platform, call it retail. On the other side industrial businesses, the core businesses starting from oil exploration to refining to derivatives of refining in the form of chemicals, polymers, petrochemicals etc. So, obviously that is one segment of business which is hydrocarbon sourced businesses as I would call it. Hydrocarbon sourced business ultimately is leading to the speciality chemical business and that is where they have separated out this company into O2C, which is oil to chemical. There is going to be a significantly large amount of play as far as the speciality chemical business is concerned from this particular separated out entity. They would be continuing to generate a higher amount of cash flow with the special focus on the speciality chemical wherein the margins are expected to be on the higher side. The consumer-facing businesses, which have the technology, in the next 10 years would be in a much better position to scale up because data consumption is likely to increase with the use of IoT, OTT and similar such kind of platforms which is likely to duplicate machine-based environment. Typically, it is balancing out the industrial business with the consumer business as a strategy which the group has put across.