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Last week witnessed a feeding frenzy from the crème de la crème of Wall Street’s smart money (and some Dubai’s smart money LOL!) to be part of the private market financing of Reliance Jio, the emerging supernova of India’s digital ecosystem.
After having spent $50 billion in building a scalable, state of the art wireless network, Mukesh Ambani realized that he needed strategic investors like Facebook, Google and Qualcomm to build a unique ecosystem of content, services, apps and platforms. In my opinion Mukesh Ambani will go down in history in the same league of seismic socio-economic transformational agents in Indian history as Lord Buddha, Emperor Akbar, Robert Clive, M. K. Gandhi and JRD Tata.
Reliance has focused on the hottest embryonic themes in India’s digital constellation – IOT, blockchain, edge computing, mobile wallets, payment networks, AR/virtual reality, education, healthcare, retail, media/entertainment, music streaming, Nextgen e-commerce, e-Bollywood, gaming and so much more.
In India, a nation of 1.3 billion human beings will have no choice but to access this digital octopus, a defacto economic monopoly since Vodafone, Bharti Airtel have no hope of ever competing with Reliance Jio, I can easily envisage a $150 billion market cap on the NASDAQ in the next two years. This means that investors who accumulated the shares at $64 billion in last week’s financing round will almost triple their money when the IPO breaks syndicate some time in 2022. It is no coincidence that the private equity financiers who led the round included KKR, General Atalantic, Vista and Silverlake, among the most respected names in technology finance.
The digital transformation of India will be one of the worlds’ most exciting themes in the next decade and Reliance Jio is the obvious Proxy for this theme. This is why I believe the Reliance Jio IPO will be a historic moment in the Big Tech sector, in the same league as the fabulously profitable IPOs of Microsoft, Amazon, Google and Alibaba. Hence the reason I went gaga on this investment opportunity, even though so many of my Indian friends are skeptical about private equity deals in Bharat Mata, given their bitter past experience. Yet comparing Reliance Jio to any other dodgy Indian stock promoter is like comparing the Kohinoor diamond (Yo, Queen Liz, we want it back. The House of Windsor should not hoard goods stolen from Maharaja Ranjit Singh’s teenage son way back when) to a lump of worthless coal.
Note that Reliance Industries shares have doubled since March to almost 1950 rupees on the Bombay Stock Exchange even though India has crossed one million COVID cases and Moody’s has downgraded India’s sovereign credit rating to Baa3, one notch above sovereign junk.
Mukesh Ambani believes that Reliance Jio is a potential $1 trillion business as India’s preeminent digital services champion and I do not believe he is smoking anything weird in his philosopher’s pipe. He built India’s biggest wireless network in only 3 years even though Dalal Street scoffed at his debt accumulation spree and digital fantasies. This is the reason Reliance Industries shares were dead money earlier in the decade.
Jio’s network infrastructure is both scalable and resilient. Its architecture will enable a dramatic drop in operating cost and an exponential rise in wireless broadband data usage. At $64 billion, I believe that Jio has given a gift to Wall Street since downside risk is near zero while upside potential is at least a five bagger. It is not often in life that an investor gets a chance to invest in a unique digital business with zero downside risk and five to ten times upside potential. I remember recommending Google and Tesla at their respective IPOs in my media columns and I am even more bullish in the long term prospects of Jio. Lest I be accused of home country bias, let me disclose, I would like to point out that I was born on the other side of Sir Cyril Radcliffe’s award that partitioned the subcontinent.
India will soon become a tale of two Modis – While Narendra has destroyed billions in economic value, Manoj will create hundreds of billions in shareholder value.
Jio is India’s Netflix, WhatsApp, Youtube, Zoom, Google, Spotify, WeChat, Amazon, PayPay, Alibaba, Verizon and Comcast in package. This puppy will be the mother of all digital money making opportunities in India and make Mukesh Ambani possibly the wealthiest man on earth.
At Asas Capital, my team and I constantly scan Silicon Valley for the most attractive risk/reward businesses in both the private and public capital markets. Yet Reliance Jio is in a class of its own because its pricing last week was just so ridiculously cheap. I sense Mukesh Ambani just wanted to ensure that the best and brightest of Wall Street validated his revolutionary vision (“data is the new oil”), which he articulated as far back as 2003 when I spent a month in my family’s ancestral roots in Mumbai.
Jio’s subscriber base is 388 million even now but this is only the tip of the iceberg and the runway for growth is a blowout. The biggest risk in Reliance Jio? India’s political and regulatory climate could shift against the Ambani clan. Jio could make execution missteps yet I passionately believe that the biggest risk in Jio is not owning its shares as this will be the investment journey of a lifetime. That much, at least, is certain.