How Ambani will use funding to tighten DNA loop


To record every word ever spoken by humans, five exabytes of storage space would be enough. Indian tycoon Mukesh Ambani’s telecom customers used nearly six times as much data last quarter. As the billionaire businessman targets his 428 million subscribers with a new 5G service and tries to lure another 300 million feature phone users onto smartphones, the challenge he faces has changed. When he started six years ago, the big issue was how to sell data in a developing country. What to sell next to someone who is already eating data is the question now.

One answer is financial services. People will always need credit. Whether they make it — and how much — is either left up to traditional credit scoring models, which tend to exclude a large segment of the unbanked population. Or, as demonstrated by Ant Group Co. in China and MercadoLibre Inc. in Argentina, creditworthiness can also be inferred from the transactional data of buyers and sellers on major online platforms. That’s where Ambani plans to go next — to a “consumer and merchant lending business powered by proprietary data analytics to complement and supplement traditional credit bureau-based underwriting,” its flagship Reliance Industries Ltd said. in a press release on Friday.

A successful fintech lending platform relies on what the Bank for International Settlements calls a self-reinforcing “DNA loop,” an acronym for data, network, and activity. The digital trail people leave on e-commerce or social media sites can be used to engage them in a powerful network that can be used to encourage borrowing, leading to even more data on consumer behavior leads.

This loop already exists for Reliance. The conglomerate not only owns India’s largest telecom company, but also operates the country’s largest retailer, with more than 250 million transactions in the last quarter across a 50 million square foot store. Ambani also connects customers with neighborhood shopkeepers so they can order groceries and essential items online through Meta Platforms Inc.’s WhatsApp messaging service.

However, Reliance’s growing weight in data-spitting consumer businesses isn’t exactly igniting the stock market. The stock hit about 30 times forward earnings two years ago; they are currently trading at multiples of 20. An unexpected Indian tax on transportation fuels and weak refining and polymer margins are hurting the conglomerate’s legacy petrochemicals and energy businesses. For this reason, Ambani Jio Financial Services Ltd. out — to double its consumer business and get the stock moving again. Investors will receive one share in the new company for every share they hold in Reliance. Jio Financial Services’ IPO may be fairly quick, albeit the idea being to pre-empt rival billionaire Gautam Adani. Adani’s shadow lender Adani Capital is targeting an IPO by 2024.

Will a fast-growing consumer and merchant loan book be enough to impress shareholders? It didn’t quite work that way with Paytm. The Indian online payments company auctioned off eight times more loans in the June quarter than a year earlier, sourcing and servicing clients on behalf of lenders, yet its shares remain 70% below the price they were last sold at in India’s biggest IPO November.

Here, Reliance will leverage its $200 billion balance sheet and take advantage of the cost of capital advantage it gets by being rated a notch higher than the Indian government. Ultimately, the group’s financial services business will strive to become a standalone conglomerate with a presence in everything from payments and insurance to digital intermediation and wealth management. But the cornerstone will be credit: Jio Financial will take off by providing low-cost credit to Reliance’s vast network of consumers and merchants. Now that the Covid-19 moratoria on loan repayments are in the rearview mirror, the timing is right. Bajaj Finance Ltd., the leading Indian non-bank lender, once again reports a return on equity of more than 20% on resuming growth in all segments and stable borrowing costs.

The most profitable use of granular customer information in a country like India is in expanding access to credit: more than three-fifths of the adult population are either invisible to traditional scoring models or not considered worthwhile by lenders. Ambani has the DNA loop: In the six years before the tycoon deployed its 4G telecom network, cell phones had consumed 120 exabytes worldwide. By next year, Ambani’s own customers could be consuming that much data annually. But as last Friday’s earnings report showed, even after growing by a third over two years, average revenue per user is just over $2 a month. It’s time to harness insights from shopper behavior — from telecom to retail — and unlock some value for Reliance shareholders.

More from the Bloomberg Opinion:

• India’s Richest Men and the $2 Client: Andy Mukherjee

• The feud that defined Ambani’s future: Andy Mukherjee

• India’s billionaire race sees one pulling away: Andy Mukherjee

This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.

Andy Mukherjee is a columnist for Bloomberg Opinion, covering Asian manufacturing and financial services. He previously worked for Reuters, the Straits Times and Bloomberg News.

For more stories like this, visit

Leave a Comment