Facebook investment to accelerate Reliance Jio's digital monetisation drive: Analysts

Facebook's move to pick up about 10 percent stake in Jio Platforms will accelerate Jio's digital monetisation drive and put Reliance Industries (RIL) on course to turn net debt-free by March 2021, analysts said on Wednesday

Press Trust of India April 22, 2020 12:26:50 IST
Facebook investment to accelerate Reliance Jio's digital monetisation drive: Analysts

New Delhi: Facebook's move to pick up about 10 percent stake in Jio Platforms will accelerate Jio's digital monetisation drive and put Reliance Industries (RIL) on course to turn net debt-free by March 2021, analysts said on Wednesday.

"RIL had restructured its digital business into one consolidated wholly-owned subsidiary - Jio Platforms - which would host all the digital initiatives of the firm, including Jio digital services (mobile, broadband), apps, tech capabilities (AI, Big Data, IoT) and investments (like Den, Hathway)," Credit Suisse said in a note.

It said that Facebook's investment into this entity will further Reliance Industries' digital initiatives and will help in deleveraging.

Facebook investment to accelerate Reliance Jios digital monetisation drive Analysts

Representational image. Reuters.

"...The deal will aid in achieving net debt-free (target) by March 2021. As of 31 December, 2019, net debt for the group stands at Rs 1,531 billion (Rs 1.53 lakh crore) and with Facebook's investment, this should put RIL on course to be net debt-free by Mar-2021," it said.

Click here to follow LIVE news and updates on stock markets

The announcement includes the commencement of a partnership among JioMart (platform of RIL's new commerce initiative), Reliance Retail and WhatsApp, it noted.

"Currently, new commerce is under purview of Reliance Retail and outside of Jio Platforms. The partnership will entail leveraging the messenger platform to facilitate new commerce transactions between a consumer and a kirana store," Credit Suisse said.

In similar vein, Bernstein said the partnership is strategic for both companies.

"The investment in Jio is one of the biggest investments Facebook can make. The transaction fits with their recent push to build themselves and experiment more and provides a closed network of 388 million users to test on, proof point around the already announced partnership to build and test a WeChat like app," it said.

"Facebook has already launched WhatsApp as customer service/social commerce tool in India allowing brands and retails to talk directly to customers/prospects, this can strengthen that offering both for 60 million small merchants on JioMart but also for Reliance Jio itself," Bernstein added.

Facebook on Wednesday announced an investment of $5.7 billion (Rs 43,574 crore) to buy a 10 percent stake in the firm that houses billionaire Mukesh Ambani's telecom arm Jio as the social media giant looks to expand presence in its largest market in terms of subscriber base.

"Today we are announcing a $5.7 billion, or Rs 43,574 crore, investment in Jio Platforms Ltd, part of Reliance Industries Ltd, making Facebook its largest minority shareholder," the company said in a statement.

Reliance in a separate statement said the investment by Facebook values Jio Platforms at Rs 4.62 lakh crore pre-money enterprise value ($65.95 billion, assuming a conversion rate of Rs 70 to a US dollar).

"Facebook's investment will translate into a 9.99 percent equity stake in Jio Platforms on a fully diluted basis," it said.

Jio Platforms, a wholly-owned subsidiary of Reliance Industries Ltd (RIL), houses digital services of the group. Reliance Jio Infocomm Ltd, with 388 million subscribers, is a wholly-owned subsidiary of Jio Platforms.

The Facebook deal is part of value unlocking by RIL to cut debt. RIL has been seeking strategic partnerships across its businesses while targeting to deleverage its balance sheet.

(Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Firstpost)

Updated Date:

also read

Reliance Industries rights issue opens today; here's all you need to know about biggest-ever fundraiser
Business

Reliance Industries rights issue opens today; here's all you need to know about biggest-ever fundraiser

Reliance Industries has already garnered Rs 67,195 crore through stake sale in Jio Platforms in four weeks ahead of its rights issue.

Facebook invests Rs 43,574 cr in Reliance Jio for 9.99% stake; becomes largest minority shareholder
Business

Facebook invests Rs 43,574 cr in Reliance Jio for 9.99% stake; becomes largest minority shareholder

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

Jio emerges as a leapfrogging platform in Ambani's industrial shuffle, aided by trademark financial engineering
Business

Jio emerges as a leapfrogging platform in Ambani's industrial shuffle, aided by trademark financial engineering

Reliance Jio plans to offer new Bollywood releases into broadband-linked living rooms across India. Where will that leave multiplex operators?