Reliance Jio-Facebook deal: 'Marriage of two super powers, will be a transformational partnership for India', say experts
Facebook is investing $5.7 billion in Reliance Industries Ltd's (RIL) Jio Platforms
Facebook is investing $5.7 billion in Reliance Industries Ltd's (RIL) Jio Platforms. The deal will give Facebook deeper access to India, the second-largest internet market after China. The deal will help reduce RIL’s debt burden, which swelled due to the expansion of Jio and other businesses.
What does the mega Rs 43,574-crore deal mean for India?
Experts weighed in with their views.
Deepak Jasani, Head Of Research, HDFC Securities
The deal between Facebook and Reliance is a positive for Reliance Industries coming under the current trying times. The two can combine their unique strengths using their network of users, share their data, develop apps for social, digital payments, gaming, shopping, flight and hotel bookings, etc. The combination of Whatsapp expertise and user base, R Jio’s vast subscriber base and Facebook’s deeply entrenched userbase and technology is theoretically a win-win for all.
Reliance could use the proceeds of this transaction to cut its debt and overcome doubts about debt reduction process following the oil price crash and doubts over its deal with Saudi Aramco. Clearance from the Govt for the deal will be crucial. Reliance’s stock price has risen post the announcement by 13 percent plus, compared to 12. percent rise in Aug 2019 post the announcement of a bigger deal with Saudi Aramco. The reaction of its stock price to this development could be over in a couple of days and the stock could then fall in line with the overall market.
Viram Shah, CEO and Co-Founder, Vested Finance
The Facebook and Jio deal is the marriage of two super powers. With the reach and deep pockets that both of them have, it will be a transformational partnership for India. Over the past years Facebook has acquired some very interesting assets like Whatsapp and Instagram. These assets combined with Jio's existing infrastructure make it a very interesting combination. Seems like their first target is improving the lives of local kirana stores, a market that a lot of startups have gone after recently. Interestingly, Reliance already has a large offline presence via their Reliance Digital and Jio stores, this gives the opportunity to create a unique online-offline experience."
Sanju Verma, economist
Stake by Facebook, in Jio,comes at a crucial time and is great news for Reliance, which wants to deleverage its massive gross debt of Rs 3.07 lakh crore.
It is BIG news for India,which will net in almost $6bn,in FDI. It also endorses solid investor confidence in @narendramodi govt.
Prof Davinder Singh, Asst Dean-SoM, BML Munjal University
Reliance needs an infusion of large amounts of cash to reduce its debt of close to $40 billion. The 20 percent stake in RIL to be picked up by Aramco has been behind schedule due to multiple reasons. The crude oil price war between Saudi and Russia has been on even prior to the current situation due to COVID 19. An arbitration with Indian Government related to accounting practices of certain fields is another.
The $ 5.7 billion will not only ease the debt but will also position RIL to offset the financial impact by the strong decline in oil economy worldwide due to COVID-19 . Technology is the one sector which has benefitted hugely from the situation. Combining technology and mobile platforms allow for synergies and convergence which will be hard to compete against for the companies in pure technology or pure mobile telephony.
Coming together of Jio Mobile (carrier), WhatsApp (Communication system) and e-commerce of Facebook, all three together on a single platform can create an e-marketplace for small businesses which will allow them to compete with large e-tailers. While the last mile connectivity continues to be a challenge and expensive, but the expected extended periods of restricted movement due to COVID19 will encourage the users to prefer linking with smaller businesses which are physically closer to them then the large e-tailers who might be cheaper but have a challenge to deliver in situations which have been encountered recently.
Praveen Khandelwal, General Secretary, Confederation of All India Trader (CAIT)
The only two expectations India and Indians would have about any new and large scale initiatives is that firstly, they should happen within the letter and spirit of India’s FDI norms and secondly, such initiatives and the capital infused, is used to develop the market and overall infrastructure in India rather than to merely rout competition and gain dominance. In data sharing etc
The first kind is developmental and good for the nation and the value it creates, while the second is what has affected smaller businesses & India’s core strength of its diverse businesses. The good thing is, Indian consumers are getting wiser. As an example, during COVID-19 lockdown, they saw who kept their homes stocked and who sat silent. They have a clear sense of opportunists versus true business enablers. I expect, hereon, Indian consumers will likely support businesses and solutions that are working in their larger and longer term good. Afterall, consumer is king (Queen) and her voice is always the loudest.
(Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Firstpost)
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