To Understand Jio, You Need to Understand Reliance

This article delivers a very good understanding of what it's like to be an entrepreneur in India. Kudos.

One of the coolest things I've read about Jio is something I read on a previous post on HN: that the name and logo were designed to be the mirror image of oiL.

> Later, Reliance profited from other parts of India’s protectionist regime. Their synthetic fiber arbitrage worked like this: to make manufacturers self-sufficient, the Indian government allowed them to import raw materials only in proportion to the goods they exported. Ambani persuaded the government to let him import polyester filament yarn in proportion to the nylon goods he exported. Nylon was available cheaply in India, polyester filament was 600% more expensive when locally sourced in India than its cost when imported. So Ambani set up a closed loop: make nylon clothes from locally-sourced materials; sell them abroad; use the import quota to import polyester filament; sell it at home. And, just to be safe, he took care of the demand side, too: at least according to The Polyester Prince, Ambani sent money abroad to buy his own products at duty-free ports, and then sold them for cheap, gave them away, or even dumped them in the ocean.

All true except in many cases, the exporters didn't need to actually export anything. If the right bribes were paid (Congress Party's modus operandi), it was all a "receipts game"... you just needed receipts that "proved" that you had sent goods abroad, that money had hit the bank, etc.

There was a huge fertilizer subsidies scam in India a couple decades ago which was another case of "receipts game". (The scam involved subsidies [given by the government] for using fertilizer [similar to Agricultural Subsidies in the USA]. Turns out that most of the subsidies were going to politicians who weren't using any fertilizer, they were just providing the correct receipts that "proved" that they had bought -- and presumably used -- fertilizer.)

Finally, I worked at a bank in India for a short while, just after the major devaluation of the currency in the nineties (the Indian Rupee was devalued by over 50% in two phases). Around midnight, the day before the surprise announcement by the Reserve Bank of India (and the Government of India), a bunch of treasury operations staff at the bank got marching orders to go to the office and sell off, as much as they could, the Indian Rupee, and buy foreign currencies. They worked all night. The client made millions from this bank's operations alone. The client? Reliance.

For those looking for the banned book "The Polyester Prince: The Rise of Dhirubhai Ambani" ... here's the link to donwload: https://www.dropbox.com/s/e1kdqqnqpl9uhfv/The-Polyester-Prin...

Agreed with the premise of title. I think Vedica Kant does a more comprehensive job laying out where Reliance comes from & how it was shaped in her substack newsletter two-parter:

https://hind.substack.com/p/reliance-origins

https://hind.substack.com/p/from-oil-to-jio

> That JIO has designed and developed a complete 5G solution from scratch

Is that really true, or just some marketing hogwash? If true, then why is Jio not building a Huawei and helping install 5G all over the world? From what I know, very few companies have the technology to build 5G infrastructure.

If India is Detroit in the Robocop universe, Reliance is OCP.

> Reliance’s timing was uncanny: when tariffs went up, Reliance happened to have stockpiled the goods in question; when their inventories ran down, tariffs dropped. It’s unclear when the system switched from Reliance knowing what the government would do to Reliance deciding what the government would do, but clearly at the peak of their power they were able to call the shots.

> As a public company, Reliance engaged in some novel financial engineering—issuing convertible bonds with ambiguous conversion terms, exploiting those terms to get cash when necessary, and at one point cornering the market in their own stock. Perhaps the high point of Reliance’s financial engineering was in 1986, when the company publicly stated that earnings would rise, then found that earnings weren’t rising after all. The solution: an 18-month fiscal year. Record profits secured.

> Jio’s fundraise was opportunistic in two directions: Reliance wanted to delever, and outside investors wanted access to India’s market. It’s not a coincidence that this fundraising occurred at the same time that tensions with China erupted; a country that can ban TikTok and restrict Chinese investments can do the same to other countries, too. And, of course, it helps that Jio is getting more liquidity at the same time that its competitors mysteriously found themselves on the hook for giant fines.

For clarity's sake, usually bribery, securities fraud, money laundering, revenue recognition fraud and other demonstrably fraudulent activities gets you put in jail. Not lauded as being clever.

If the investments put in by Facebook and Google are used to manipulate the local political environment, does this mean that they're on the hook for liability via 15 U.S.C. § 78dd-1, et seq.? Or, the Foreign Corrupt Practices Act? Do the firms have liability, or are they shielded via virtue of the "investment"?

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Some Google searches later, one of their executives, p̶r̶e̶s̶u̶m̶a̶b̶l̶y̶ ̶a̶ ̶f̶a̶m̶i̶l̶y̶ ̶m̶e̶m̶b̶e̶r̶, tried to get someone killed by calling in the mob, https://www.indiatoday.in/magazine/cover-story/story/1989083...

https://www.economist.com/leaders/2014/08/02/an-unloved-bill...

Their history is hard to believe and harder to square away. Will this lower FB and G's liability shield? Any thorough due diligence should easily uncover more in this wretched hive of scum and villainy.

So will Ambani become the India's tech Godfather. If that so then it is interesting if we compare India's tech scene and China's.

For example, the Chinese tech giants (Jack Ma, Pony Ma, Robin Li, et al) seems come from zero, instead of other established rich folks (Dalian Wanda group, Li Ka Shing, Walter Kwok).

I am stuck in a small city near Delhi.

It's hard to find things like olive oil anywhere except for Jio app. Atleast I am thankful for that.

tl;dr: a monopoly with deep ties to government.

This is a bizarre article in the flavor of NY Times India coverage which cannot look at India except through the lens of cow, caste and curry. After all how could a third world entrepreneur build the biggest data network in the world for the cheapest price? Not once but twice!

One instance of how the article is riddled with errors:

"From 1980 to 1985, the number of equity investors in India rose from 1m to 5m, and by 1985 1 million of them owned shares of Reliance. Since equity investors are likely to be middle class and above, this gave Reliance a broader political constituency: instead of buying individual regulators with bribes, they nudged the electorate with dividends."

As per [1] 240 million people cast votes in the 1985 election. So with 0.25% of the total vote scattered across hundreds of constituencies Reliance was able to swing the electorate which is fractured across die-hard political affiliations, economic interests, religions and caste hierarchies. Sure whatever.

Perhaps it is hard for the author to admit that Mukesh Ambani, the current CEO of Relaince/Jio and son of the founder, is a unparalleled operational genius. He singlehandedly led the team that rolled out the biggest refinery in the world in Gujurat in 1999 [2] where "biggest in the world" and India never went together for anything manufactured.

He also rolled out Reliance Communications in the 1990s which was then the cheapest mobile provider by an order of magnitude [3]. That business went to his brother Anil in the family split in 2006 and Anil ran it into the ground. When their fraternal non-complete expired Mukesh built out Jio which again dropped data pricing by an order of magnitude and made voice free. Jio now has the cheapest data in the world [4]. This bankrupted all his competitors who were centi-billion market cap companies and forced them to drop prices and merge. It also bought hundreds of millions of extremely poor Indians to feature phone ownership for the first time. They had the opportunity to what he did but could not. They also wielded the same power with the bureaucracy that he did but were not able to leverage it.

I certainly would like 12GB of data $1.23. Heck, even 10x that is a bargain. But instead of pondering what he did the author spins dark tales of subterfuge, mafia, corruption and bribes.

Eye-roll

[1] https://www.idea.int/data-tools/country-view/146/40

[2] https://www.bechtel.com/projects/jamnagar-oil-refinery/

[3] https://www.rediff.com/money/2002/dec/27ril1.htm

[4] https://www.cable.co.uk/mobiles/worldwide-data-pricing/

Jio/Reliance is https://en.wikipedia.org/wiki/Oligarchy

And to understand Reliance, you need to understand Caste system in India;

TL;DR

Casteism is an Organized mafia in India since 700 BC https://archive.is/PdiUF

BC/SC/ST people, 80% in India, were denied education/employment and basic human rights for 2700+ years as per https://en.wikipedia.org/wiki/Rigveda in https://en.wikipedia.org/wiki/Timeline_of_Indian_history

In 1932 https://en.wikipedia.org/wiki/B._R._Ambedkar, Architect of the Constitution of India demanded a separate country (not Reservations/Affirmative Action) for them https://en.wikipedia.org/wiki/Communal_Award

https://en.wikipedia.org/wiki/Mahatma_Gandhi opposed it, bullied and bribed them with https://en.wikipedia.org/wiki/Poona_Pact