Facebook Buys 9.99% Stake in Reliance Jio for Rs 43,574 Crore, Largest FDI in India's Tech Sector
A woman rides her scooter past advertisements of Reliance Industries' Jio telecoms unit in Ahmedabad. (REUTERS)
Reliance Jio, the telecom unit of Reliance Industries Ltd (RIL), has sold a 9.99 per cent stake to US tech giant Facebook for $5.7 billion, or Rs 43,574 crore, in a deal that puts the pre-money enterpise value of Jio Platforms at Rs 4.62 lakh crore.
The multibillion-dollar deal will make Facebook the largest minority shareholder in Jio Platforms Limited. Calling the partnership unprecedented in many ways, RIL said this is the largest investment for a minority stake by a technology company anywhere in the world and the largest FDI in the technology sector in India.
The partnership will help RIL reduce its debt burden while it will help Facebook get a firm foothold in a fast-growing and massive market. The social media giant said it would focus on collaborating its messaging platform WhatsApp with Reliance's e-commerce venture JioMart to enable people to connect with small businesses.
Commenting on the partnership with Facebook, RIL chairman Mukesh Ambani said, “When Reliance launched Jio in 2016, we were driven by the dream of INDIA’S DIGITAL SARVODAYA – India’s Inclusive Digital Rise to improve the quality of life of every single Indian and to propel India as the world’s leading Digital Society. All of us at Reliance are therefore humbled by the opportunity to welcome Facebook as our long-term partner in continuing to grow and transform the digital ecosystem of India for the benefit of all Indians.”
“The synergy between Jio and Facebook will help realise Prime Minister Shri Narendra Modi’s ‘Digital India’ Mission with its two ambitious goals — ‘Ease of Living’ and ‘Ease of Doing Business’ – for every single category of Indian people without exception. In the post-Corona era, I am confident of India’s economic recovery and resurgence in the shortest period of time. The partnership will surely make an important contribution to this transformation,” he added.
In a Facebook post, Mark Zuckerberg said one focus of the collaboration with Jio will be creating new ways for people and businesses to operate more effectively in the growing digital economy. “For instance, by bringing together JioMart, Jio’s small business initiative, with the power of WhatsApp, we can enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience.”
Jio Platforms, Reliance Retail Limited and WhatsApp have also entered into a commercial partnership agreement to further accelerate Reliance Retail’s new commerce business on the JioMart platform using WhatsApp and to support small businesses on WhatsApp, the two companies have announced.
"Reliance Retail’s New Commerce platform, JioMart, is being built in partnership with millions of small merchants and kirana shops to empower them to better serve the needs of Indian consumers. The companies will work closely to ensure that consumers are able to access the nearest kiranas who can provide products and services to their homes by transacting seamlessly with JioMart using WhatsApp," said a statement issued by Reliance Jio on Wednesday.
Since Jio's launch in 2016, Reliance has emerged as the only company capable of competing with US tech groups in the fast-growing Indian market. It has expanded from mobile telecoms into everything from home broadband to ecommerce. Reliance Jio also owns a suite of services including music streaming service JioSaavn, on-demand live television service JioTV and payments service JioPay.
The deal will help reduce RIL’s debt burden, which bulged due to the breakneck expansion of Jio and other businesses. Ambani invested around $40 billion to launch Jio in 2016. RIL is also the largest retail player in India thanks to a series of aggressive expansionary moves into consumer-facing businesses.
The investment values Jio Platforms amongst the top 5 listed companies in India by market capitalization, within just three and a half years of launch of commercial services, validating Reliance Industries’ capability in incubating and building disruptive next-generation businesses, while delivering market defining shareholder value.
For Facebook, India has in recent years emerged as a critical market. The company has more users in India than any other country and its chat service WhatsApp has also attracted 340 million users in the country.
Despite the rapid growth of its social network and WhatsApp, Facebook stumbled with its Free Basics plan to provide free internet services after a ban by Trai, the telecom regulator. It now has an established ally with an established rural network on its side that is present in sectors ranging from telecom to ecommerce to home internet.
The deal will also help Facebook battle rapidly growing Chinese apps like Tiktok which have attracted India’s youth. Not to mention a mouth-watering four way tech tussle with Japan’s Softbank , US heavyweights Google & Amazon and China’s Alibaba.
A recent report by Cisco said India is poised to have more than 900 million internet users due to the increased penetration of affordable smartphones and cheaper internet plans. India will also have around 2.1 billion internet-connected devices by 2023, said the report.