Mumbai: Aswath Damodaran, dubbed the dean of valuation pointed the Reliance Industries’ Jio Platforms is a good example on how a unit could be nurtured in a family-backed company, and said it would not have been possible in an otherwise environment.
“Jio is the classic example, what a family group can do well to nurture something in the company. That could not have survived in a company where stockholders may be demanding actions and returns in the near term,” he said in a webinar conducted by TedXGateway late on Wednesday.
Launched in 2016, Jio is now the country’s largest telco with 388 million subscribers.
Speaking from San Diego, Damodaran, who had in the past said he saw corporate governance issues with Reliance, said governance is a mixed perspective which has a good side as well as a bad side.
“When there is weak corporate governance, there is someone running the company without being challenged,” said Damodaran, who has been a critic ofReliance for corporate governance.
“It is not just true about Reliance, but almost all family group companies. So, I think that in case of Reliance, people were betting on the family kind of preserving and drawing the company,” said Damodaran, who is a Professor at Stern School of Business, NYU.
He hopes that going ahead, Jio acted in its own interest rather than the parent.
“I would hope that Jio has some independence. In the sense that you want to make sure that Jio acts in its own best interests and not in Reliance’ s best interest,” he said.
He pointed that Jio was a powerful platform and a wide user base was drawing investors to it. Since April, Jio Platforms has raised Rs 1,15,693.95 crore from leading global investors including Facebook, Silver Lake, Saudi Arabia’s PIF, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG and L Catterton.
“Jio has its strength, and the biggest strength is its platform, and lets face it, that platform can be incredibly valuable, perhaps more valuable to companies other than Reliance, like Facebook and Amazon,” said Damodaran
“(These companies) would kill to have 300 million people on their platform two hours every day,” he added.
“I think what RIL is doing is letting Jio kind of live on its own. It has the capacity to draw capital. This is where access to risk capital will allow Jio to live on its own,” said Damodaran.
Source: ET Markets