Mukesh Ambani, Gautam Adani And A Game Of Cricket

Last June, Viacom18 Media Pvt., a joint venture between Ambani’s Reliance Industries Ltd. and Paramount Global, spent $2.7 billion to win an exclusive, five-year live-streaming deal for Indian Premier League matches, outbidding Walt Disney & Co., the previous owner. Disney’s Hotstar app eked out 76 cents a month from each of the 50 million Indian subscribers who signed up primarily to watch IPL in the cricket-crazy nation. If that was chump change, Ambani has decided to forgo it altogether — at least for this year’s tournament that starts March 31. He may have a bigger prize in mind: commerce.

The timing is just right for the eyeball-grabbing initiative. Jio Platforms Ltd., Ambani’s almost-seven-year-old mobile-internet startup, is probably headed for an initial public offering — after global investors get over the $140 billion meltdown in rival Gautam Adani’s debt-fueled stocks. Adani, too, has an ambitious plan for a consumer super-app, though his priority now must be to steady his sprawling infrastructure empire. With Adani distracted, Ambani’s burgeoning digital domain might get a leg up.

Ambani and Adani. The two billionaires have adopted different playbooks. While Adani went headlong into public utilities, Ambani has focused on private wants. Adani’s problem is that while Indians crave better roads, airports and more reliable power, most users lack the ability — or the willingness — to pay for the costly capital required to build new assets. In Ambani’s case, too, the underlying weakness, which has forced the refining and petrochemicals conglomerate to undertake a consumer pivot, is profitability. Reliance’s legacy business spews out cash, but it takes lumpy investments that don’t generate a high return on equity.

Ambani’s consumer strategy is a mix of carriage, content and commerce. Of the three, the plan for carriage is secure, with Jio Platforms boasting of more than 430 million subscribers and the retailing business, the country’s largest, recording more than half a billion transactions in the past six months.

Establishing supremacy over commerce, though, won’t be easy. Jio’s cutthroat pricing deserves credit for India’s increased penetration of smartphones and proliferation of affordable data plans. But those enabling features have aided Amazon. com Inc. and Walmart Inc.-backed Flipkart to sign up middle-class Indian spenders in smaller cities. In contrast to these pure e-commerce channels, Ambani’s “phygital" retail model is clunkier: It aims to enlist the neighborhood grocer to fulfill digital orders.

For this idea to take off, Ambani will need to create demand for staples. That’s what his network of mom-and-pop stores can supply most successfully. Which is where the third leg of the strategy — content — comes into play. The tycoon tested the market by showing the soccer World Cup in India for free on JioCinema, with an audience of 32 million tuning in to watch the Argentina-France final. The experiment wasn’t exactly a smooth experience for viewers, but if the group can do better with the IPL franchise, large advertisers like the local units of Unilever Plc and Procter & Gamble Co. will come with their checkbooks. More importantly, Ambani may want to use the free content to push his own in-house brands from foodstuff to cleaning liquids.

Ninety percent of India’s trade passes through neighborhood stores. Brands that control distribution networks, comprising millions of small, independent shops, garner some of the highest returns on capital among publicly traded firms. But this so-called general trade depends heavily on advertising to drive demand. That’s why free livestreaming may be so crucial for Ambani. He can peddle his own Good Life rice, and Get Real shower gel, just like his father had once hawked polyester suits on India’s national television.

Silicon Valley has billions of dollars riding on Jio Platforms’ IPO. Back in the summer of 2020, Meta Platforms Inc. and Alphabet Inc. invested $5.7 billion and $4.5 billion, respectively, in the business. Other prominent California-based investors included Silver Lake Partners, Qualcomm Inc. and Intel Corp. It was a fast-growing franchise back then, with one problem: Jio subscribers didn’t even pay $2 per month, on average. The telco’s aggressive campaign to win market share in India was keeping a lid on price plans.

That’s changing. Jio’s most recent per-user revenue has risen past $2 a month. The Indian mobile market is now reaching saturation levels — growth in new subscribers is slowing. It’s only with 10% annual price increases for three years that Jio will hit a 12-month Ebitda(1) in the vicinity of $9 billion in March 2025, according to Jefferies. Without the boost, Ebitda may be 25% lower. “This could meaningfully impact Jio's valuation around listing," Akshat Agarwal, a tech analyst at Jefferies India Pvt., wrote in a Jan. 10 note.

When Meta, then known as Facebook, had acquired a near-10% stake in Jio, it had valued the franchise at roughly $66 billion. In December this year, the enterprise should be worth around $90 billion, in Jefferies’ estimates, including $22 billion in net debt. By the time Jio goes public in 2024 or 2025, the currently ongoing 5G-related expenditure would be tapering off. Once investors see net debt sliding as a ratio of a growing Ebitda, they might give the existing set of Silicon Valley backers handsome exits. If they also envision a lucrative business in consumer staples riding the coattails of telecom carriage, they’ll open their purse strings wider. For the latter narrative to take hold, free advertising to an audience held hostage by cricket may be key.

This year’s IPL will conclude in Ahmedabad, in a stadium named after Prime Minister Narendra Modi, with its two bowling ends informally known as Reliance and Adani. Make no mistake: This is a contest between two rich, powerful men, neither of whom has yet proved why they deserve to win. A successful Jio fundraising, following a flop of a public offer by Adani Enterprises Ltd., will put Ambani in the lead, reversing an outcome that even last year had the other magnate pulling ahead. Cricket, they say, is a game of glorious uncertainties.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. Previously, he worked for Reuters, the Straits Times and Bloomberg News.