Mukesh Ambani, the legendary richest Indian with $34.8billion wealth and the only Indian Business mogul to be named in the prestigious Forbes magazine has now outstripped Li Ka-shing, business magnate and investor of Hong Kong and has taken his position to become the second richest man of Asian continent.
He has achieved these heights with his new and unique project of free 4G mobile data to all and fourth generation mobiles at a small price of Rs1500 and that too with 100% cash back after 3 years. Noticeably, according to Bloomberg Billionaires Index, he has been able to add $12.1 billion dollars in a single year, with a beyond belief and uncommon venture.
All the other internet service providers are highly adversely affected with Mukesh Ambani’s Jio plan. Business works like this, where one gains the other loses. It also happened in this case as well. Reliance Industries benefited from its Jio plan, on the contrary giving sleepless nights to the chairmen of the other ISPs resulting into merger of some of them. Idea and Vodafone has shaken hands to compete with Ambani’s master plan but are seemed to be failed in one sense or the other.
But, the task has been huge for the telecom and risk is still involved in it. Ambani and his shareholders are under a debt amount which is highest in the last 15 years. Investment of $31billion dollars is made into this to make it successful and Reliance Industries would hardly earn any profit. 9/10th of the revenues come from petrochemicals and refining units.
According to Bloomberg, the debt-to-EBTIDA ratio of Reliance Industries has increased four times since March 2002. EBTIDA is the measure of the company’s growing debt amount. The company’s spokesman has remained silent in this matter when asked the question of its multiplying debt amount in a recent interview.
Ambani considers his Jio plan as the forte amongst his Reliance products, and is aiming to bring home the bacon and take the program to new heights till 2025, he said in the general meeting held in the month of July. He and his whole team are putting their best foot forward to become the country’s best service provider.
The shares of Reliance Industries have hiked by 49% percent this month.
Reliance Jio Infocomm Ltd is new in the market, so it has to bear some losses under significant depreciation and amortization charges till March 2021 written by Mr. Aditya Suresh, analyst of Macquarie Research Report in July. The cost of assets usually spread out over life due to depreciation and amortization.
The sequence of the list of the richest people in the Bloomberg Billionaires Index is modified by Ambani’s Reliance Jio Infocomm as it has lifted his rank from 29 to ‘19’ at the end of 2016.
Ambani has attracted a millions of customers with his introductory offers. More than 117.3 million are taking advantage of free mobile data services. The prime offer of Jio has climbed its shares by 50%. The announcement of introduction of Jio4G phone with 100% cash back was heralded the previous month. The chairman of the company is targeting to captivate around 500 million users with his Jio4G phone. They are especially focusing the second generation network users.
S&P Global Ratings Singapore based analyst, Vishal Kulkarni said that the company may be aided with its investments in the petrochemicals and refining. Jio may harvest 50% gain which might amount to $1 billion to the Reliance Industries from this financial year. “There are strong incumbents, who will give a good fight over subscribers or revenue share,” he said. “More than 70-80 percent of the EBITDA will come from refining and petrochemicals” he added.
According to statement on Reliance’s website, less than 2% percent is accounted by Reliance Retail out of its group profit after a decade of its launch. Cash Reserves has diminished by 7% despite of its addition from petrochemicals and refineries in the last half decade. The company is definitely going to suffer a debt of $12billion in the next three years. Last year, any repayment or refinancing in the cash-churning businesses contributed the company to earn a net profit of $4.7 billion. The company is investing an amount of $18 million in expanding petrochemical capacities.
“Our energy and materials businesses constitute a strong platform to generate stable, annuity-like cash flows with a potential to reach EBITDA of 1 trillion rupees within the next few years,” Ambani said on July 21.
According to Kotak Securities, the debt number of Reliance Industries is going to get double in the two to three years as the company is planning to invest Rs500 billion in 2017-18 and due to payment payable and deferred liabilities.
Kulkarni said “We rule out a substantial reduction in effective net debt over 2-3 years.”