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

Reliance Industries Limited (RIL), Jio Platforms Limited and Facebook, on Wednesday announced the signing of binding agreements for an investment of Rs 43,574 crore by Facebook into Jio Platforms. This 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.

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Commenting on the partnership with Facebook, Mukesh Ambani, Chairman and Managing Director, Reliance Industries Ltd, said, “The synergy between Jio and Facebook will help realise Prime Minister 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," Ambani said in a statement.

Facebook wrote of the investment on its website. "This investment underscores our commitment to India, and our excitement for the dramatic transformation that Jio has spurred in the country. In less than four years, Jio has brought more than 388 million people online, fueling the creation of innovative new enterprises and connecting people in new ways. We are committed to connecting more people in India together with Jio.

Representational image. Reuters.

"Our goal is to enable new opportunities for businesses of all sizes, but especially for the more than 60 million small businesses across India. They account for the majority of jobs in the country, and form the heart and soul of rural and urban communities alike. In the face of the coronavirus, it is important that we both combat this global pandemic now, and lay the groundwork to help people and businesses in the years to come.

"One focus of our 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." Facebook said on its website.

Win-win deal

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. It has been talking to Saudi Aramco for sale of a 20 percent stake in its oil-to-chemical business for an asking of $15 billion. RIL has already tied up with BP Plc for fuel business as it targets to have a debt-free status by next year, PTI said.

Jio had also been reportedly talking separately to Google, PTI said.

The latest deal is a win-win for both Facebook and Jio. It would give Facebook deeper access to India, the second largest internet market after China.

Jio-Facebook partnership

Reliance Jio Infocomm Limited, which provides connectivity platform to over 388 million subscribers, will continue to be a wholly-owned subsidiary of Jio Platforms, the company statement said. Jio’s vision is to enable a Digital India for 1.3 billion Indians and Indian businesses, especially small merchants, micro-businesses and farmers.

The partnership between Facebook and Jio is unprecedented in many ways. 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 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.

"Our goal with this investment is to enable new opportunities for businesses of all sizes, but especially for small businesses across India and create new and exciting digital ecosystems that will empower, enrich and uplift the lives of all 1.3 billion Indians," Reliance Jio said in a statement.

"This partnership will accelerate India’s all-round development, fulfilling the needs of Indian people and the Indian economy. Our focus will be India’s 60 million micro, small and medium businesses, 120 million farmers, 30 million small merchants and millions of small and medium enterprises in the informal sector, in addition to empowering people seeking various digital service," the company statement said.

The partnership assumes special significance for India in the wake of the severe disruptions caused by the coronavirus pandemic in the Indian — and the global — economy. In the postCOVID era, comprehensive digitalisation will be an absolute necessity for revitalisation of the Indian economy. "It is our common belief and commitment that no Indian should be deprived of the tremendous new opportunities, including opportunities for new employment and new businesses, in the process of India’s 360-degree digital transformation.

Concurrent with the investment, 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. Together with WhatsApp and Instagram, Facebook overall is estimated to have more users in India than any other single country.

The number of internet users in India is projected to rise to about 850 million in 2022, according to consultancy PwC, up from 450 million in 2017.

WhatsApp already plays an important role in helping people and businesses connect in India. 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, the statement said.

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