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Indian billionaire's bet on rising middle class paying off

New Delhi

BILLIONAIRE Mukesh Ambani's debt-fuelled bet on the rise of the Indian consumer is starting to pay off, with his retail and telecommunications businesses contributing an increasing share of revenue and profit to his US$87 billion empire.

The two divisions accounted for a combined 23 per cent of revenue for the year ended March, up from 17 per cent in the previous year, according to data compiled by Bloomberg. That growth has come at the expense of the conglomerate's energy-related arms, which have been the bedrock of the Ambani business for more than a decade. Their revenue share dropped to 77 per cent from 83 per cent, the data shows.

Asia's richest man has ambitions to take on Amazon.com Inc and Walmart Inc in India, where the power of the middle class is growing along with demand for e-commerce. Mr Ambani launched the telecommunications business in 2016, spending US$36 billion to roll out a 4G wireless network across India and luring millions of subscribers with free or cut-price data services. He's now building on that business to create an online shopping platform, just as the US giants come up against constraints on foreign e-commerce activity in India.

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Mr Ambani has set big expectations for Reliance's consumer divisions, saying they will contribute almost as much to the conglomerate's earnings as energy-related arms by the end of 2028.

The push into e-commerce shows how the billionaire is trying to put his mark on an empire that he largely inherited. Mr Ambani, whose father Dhirubhai founded Reliance in 1959, agreed to split the businesses with his brother Anil three years after their father died without leaving a will.

Mukesh got control of the flagship oil refining and petrochemicals arms, while Anil got Reliance's newer services businesses in the split, including telecommunications.

His brother's entry into the industry and resulting price war has hit many rivals - including Anil's Reliance Communications Ltd - undercutting market leaders Vodafone Idea Ltd and Bharti Airtel Ltd in a price war. Reliance Jio Infocomm Ltd, Mukesh's telecom unit, saw profit in the year quadruple to 29.6 billion rupees (S$578 million), the company said Thursday.

But he's racked up borrowing to finance that push, with Reliance Industries' net debt climbing to 1.93 trillion rupees in the year ended March, or about 2.3 times Ebitda, according to data compiled by Bloomberg. That compares with the 2.69 times average for companies on the S&P BSE Sensex index as of Dec 31.

In his quest to build a competitive e-commerce platform, Mukesh has been acquiring or purchasing stakes in businesses from Radisys Corp to Vakt Holdings Ltd in a series of deals worth US$2.5 billion over the past two years. BLOOMBERG