This post actually started out as a reply to a comment on Ashish’s (from pluggD.in) post on Reliance launching launching its Direct to Home (DTH) service called BigTV. Rohit - clearly quite frustrated asked “Why do large Indian companies have to get into EVERYTHING. Why not the world leaders in at least ONE thing.” Well Rohit, I can’t really tell you the answer to the second part, but let me say, as far as the first part is concerned - I hear you man, I feel you. To quote an aquaintance, ‘I’m afraid of the day I wake up, walk into the bathroom, pull out my Reliance toothbrush, squeeze on some Reliance toothpaste, brush my teeth and then pop into the shower, then lather myself up with Reliance soap…’

The comment was too damn long so I thought it was probably more sensible to write a post. Here’s probably why Indian companies seem to be doing everything:

1. Many of the products and services that are being launched today are still very much mass oriented - e.g. Cable Television. Any mass oriented product needs a strong brand, significant amounts of capital for investment, deep and wide distribution network. All of these, Reliance has.
2. Related to the point above - Indian consumers are highly price sensitive - and only those companies that can deliver the cheapest product will win. Its only the largest companies that have the scale and to command low input costs and therefore a lower cost finished product - i.e. the companies such as Reliance.
3. When we’re talking about an industry where there are multiple billions of dollars worth of money to be made, everybody from politicians, bureaucrats to grandmother wants a piece of it, whether they have any right to it or not. It is therefore those companies that have greased the right palms and satisfied the right connections that are able to proceed without a roadblock every 10 metres. Call this cynical, but I imagine that there’s at least some truth to it.

Is this a bad thing? From the point of view that it probably discourages entrepreneurship, yes. From the point of view that it probably prevents smaller companies from growing as fast as they could, yes. From the point of view that some companies may be becoming too powerful, yes.

But as long as there are other large companies - e.g. the Tatas of this world - to battle it out, the Indian investor gets lower prices, and wins.

On a side note, I imagine that BigTV is probably a part of the ADAG group’s BIG Entertainment company - recently valued at $3bn when George Soros paid $100mn for a 3% stake in the company. There were plans to float Big Entertainment - I wonder what happened there (probably waiting for market conditions to improve)?

Tags: Ambani, Billionaires, Finance, Investment, Investments, Leaders, Reliance

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