After building a ‘digital layer’ (Jio Platforms) on top of the existing ‘physical layer’ of retail shops, Reliance Industries would over the next four years focus on adding a third ‘layer of commerce’ and monetize the existing investments, BofA Securities said.
RIL is also looking to leverage the users’ digital footprint and earn incremental revenues from digital ads, digital lending and even engagements like play along with IPL, KBC, etc, it said in a report.
Over the next 3-5 years, RIL is expected to have 500 million mobile users, offer broadband services to 20-25 million households, and cater to 12-15 million small businesses.
“In the last 4 years, with Jio, RIL has been able to build a ‘digital layer’ on top of the existing ‘physical layer’ of retail shops across electronics, grocery, and apparel as well as depth and width of India.
“We believe the next four years, RIL’s focus would be to add a third ‘layer of commerce’ and monetize the existing investments across different formats,” the brokerage said.
Jio has 388 million subscribers at the end of FY20. Reliance has tied up with WhatsApp to deliver grocery items from local Kirana stores to customers.
Like Amazon, Alibaba, and Tencent, RIL has the potential to create shareholder value to retain its customers, BofA Securities believes.
“RIL’s approach of owning the ‘pipe’ as well as the ‘services’ offered on the pipe should help it keep the subscriber base captive and apart from the core telco and retail offerings, the company could also offer other services,” it said.
For instance, entertainment offerings would help RIL improve stickiness. Jio may not fully monetize this but would keep users captive to cross-sell other offerings.
RIL is also focusing on leveraging tech to offer ed-tech, health-tech, agri-tech services.
“We also believe gaming will pick-up in India as the country has young population mix,” it said.
An omnichannel approach on commerce would help RIL sell its grocery, apparel, and electronics items to a wider audience base.
“By working with the kiranas, RIL would likely increase its B2B sales as well,” BofA said.
Stating that potential stake sale at the retail business will be a catalyst, it said Reliance Retail may follow the Jio Platforms model, onboarding multiple investors by selling stakes in the firm.