Billionaire Ambani's show of strength

Billionaire industrialist Mukesh Ambani detailed long-term growth plans last week for his Reliance Industries that included a listing of its telecom business, a new AI venture, and expansion of the retail and new-energy businesses. Yet, why were Reliance's shareholders disappointed? That's our focus this week.

And India's world-beating GDP growth is leaving equity investors out in the cold. Scroll down for more on that. 

Ambani used Reliance's annual shareholder meeting to communicate three priorities: new businesses, listings, and its alignment with India's interests amid the U.S. tariff standoff.

Ambani's signal that it is business as usual for Reliance Industries came amid U.S. pressure on India citing its purchases of oil from Russia. As the operator of the world's largest oil refining complex and India's largest importer of Russian crude, the punitive U.S. tariffs on the country's goods exports hit home for Ambani and Reliance.

The chairman of India's most valuable corporate entity, with a market capitalisation of about $204 billion, committed to taking the group's telecom business, Reliance Jio, public by mid-2026, after deciding to defer the telco's listing this year.

Jio, Ambani said, now has 500 million customers as it enters its 10th year of operations, making it the country's largest telco.

A listing would bode well for the sector's pricing outlook and may even drive a re-rating in telecom stocks in the run-up to the IPO, said Jefferies in a note following Reliance's shareholders' meeting.

The brokerage said that for a 10% return on investment, Jio would need to target a market cap of $118 billion by March 2026. This, according to the brokerage's analysis, would need a 20% hike in pricing to get to an EBITDA of $10 billion for the financial year 2026-27.

Any increase in pricing from Jio could prompt other telcos to follow suit, boosting the sector's profitability.

Ambani also announced plans to launch a new subsidiary - Reliance Intelligence. It will partner with Alphabet's Google to bring cloud services to India and with Meta Platforms to build out AI offerings for businesses and the government.

Alphabet CEO Sundar Pichai and Meta CEO Mark Zuckerberg made a guest appearance at the shareholders' meeting for good measure.

Reliance further detailed expanded goals for its new-energy and fast-moving-consumer-goods businesses.

The company will build the world's largest solar project in Gujarat state while bolstering its green hydrogen capacity. In its consumer business, Reliance will enter apparel and electronics..

Read here for details on the announcements.

Ambani, estimated to have about $100 billion in wealth according to Forbes, has found his business dragged into the middle of the U.S.-India trade tensions, as President Donald Trump doubled the levies on Indian exports citing the country's purchases of Russian oil.

Reliance has a crude oil import deal of 500,000 barrels per day with Russian oil major Rosneft, the largest oil deal between India and Russia.

Expectedly, Ambani's carefully crafted speech made no mention of Russian oil purchases or the U.S. tariffs on Indian goods. But he did echo Indian Prime Minister Narendra Modi's call for a more self-reliant India.

Read here for more on Ambani's comments.

The Ambani family, though, has postponed a cultural event planned for September 12 in New York, citing "unforeseen circumstances".

Reliance Industries' growth plans disappointed shareholders for one main reason.

Ambani said Reliance would look to IPO the Jio business, unlike the demerger and subsequent listing route it chose with Jio Financial Services in 2023. This, analysts said, would offer strategic investors in Jio a strong exit but retail investors only modest advantages.

"Structurally, an IPO keeps Jio as a subsidiary under the Reliance Industries fold; investors may apply a holding company discount to the embedded stake," said brokerage Antique Broking.

A holding company or conglomerate discount is when a parent entity is valued below the combined value of its subsidiaries.

"A demerger distributing Jio shares directly to Reliance Industries investors would have been cleaner for value unlocking," Antique Broking said in a note on Saturday.

The demerger of Jio Financial Services had offered all Reliance shareholders one share each in the newly created entity, which is now valued at nearly 2 trillion rupees ($22.5 billion).

Shares of Reliance Industries fell on Friday after Ambani's speech. They have underperformed the NSE Nifty 50 index, declining 10% over the past 12 months compared to the benchmark which has dropped 3%.

The average rating across 33 analysts tracking Reliance Industries on LSEG is a "buy", with a median price target of 1,650 rupees, 22% higher than the current price.

Will Reliance's plans translate into shareholder gains? Write to me at ira.dugal@thomsonreuters.com.

India's economy grew at a much faster than expected 7.8% in the April-June quarter in real terms, defying expectations of a slowdown even before U.S. trade tariffs took effect.

But low inflation in the economy has meant that nominal growth dropped to 8.8% from 10.8% in the previous quarter.

Read here for more on the GDP data and what economists said about it.

The lower nominal growth has meant that corporate profit growth has remained subdued and valuations seem stretched, leaving foreign investors cautious about investing in India. Read that analysis here. 

India and China discussed expanding trade and investment ties on Prime Minister Narendra Modi's first visit to China in seven years to attend a meeting of the Shanghai Cooperation Organisation.

Modi and Chinese President Xi Jinping agreed to improve relations but stopped short of announcing specific measures.

Read this for the outcome of the meeting.

China urged leaders at the regional summit to leverage their "mega-scale market" and boost cooperation in the fields of energy, infrastructure and artificial intelligence.

Read here for more on the summit.

Soon after the meeting, Trump called the India-U.S. trade relations "one sided" in a post on his Truth Social platform. India has offered to cut tariffs to "nothing", Trump said, adding that it is "getting late".

India has so far not responded to the post.

Thousands of Indian small businesses are scrambling to find new buyers in markets across Europe, Africa and Asia to dull the impact of a 50% tariff on exports to the U.S. 

Small businesses have front-loaded shipments in August, reflected in a jump in business activity last month, and are now exploring new markets and options for transshipment to protect their business.

This newsletter was edited by Muralikumar Anantharaman, Editor, Global News Desk in Singapore. Additional reporting by Bharath Rajeswaran in Bengaluru.

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