Betting on India’s digital growth story, global tech giant Facebook has signed a binding agreement to invest ₹43,574 crore in Reliance Industries Ltd’s (RIL) wholly-owned subsidiary Jio Platforms.
The investment by internet entrepreneur Mark Zuckerberg-founded Facebook is in lieu of a 9.99 per cent equity stake in Jio Platforms. Facebook will also get a seat on Reliance Jio’s Board. The deal will help Zuckerbeg finally get a piece of India's digital growth story and Mukesh Ambani the financial firepower to invest more into 4G and 5G, even as the oil price crash impacts the Jio’s parent firm Reliance Industries Ltd.
The deal values Jio Platforms at ₹4.62-lakh-crore pre-money enterprise value ($65.95 billion at ₹70 to a dollar). This is the largest investment for a minority stake by a technology company in the world and the largest foreign direct investment in Indian technology sector.
“India is a special country for us,” says Facebook on Jio deal
“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,” RIL Chairman and Managing Director Mukesh Ambani said.
Shares of Reliance Industries jumped to a high of ₹1,384.70 on the BSE in intra-day deal and closed with a gain 10 per cent at ₹1,363.35.
Facebook opened with a gain of 5.7 per cent at $180.53 in early trade on the NYSE.
WhatsApp, Reliance Retail pact
Concurrent with the investment, Reliance Retail and Facebook’s WhatsApp entered into a pact to accelerate Reliance Retail’s JioMart by working closely with kirana shops. Mark Zuckerberg, Founder, Facebook, said the deal with Reliance Jio was aimed at providing digital tools to small businesses and the unconnected at a time when everyone is under a lockdown.
Facebook in talks to acquire stake in Reliance Jio: ReportDiscussions have currently been paused due to global travel restrictions, says Financial Times
Analysts said the deal benefitted both players. “Over the past years, Facebook has acquired some interesting assets such as Whatsapp and Instagram. These assets combined with Jio's existing infrastructure make it an interesting combination.
“It seems like their first target is improving the lives of local kirana stores, a market that a lot of start-ups have gone after recently,” said Viram Shah, CEO and co-founder, Vested Finance.
Jio Platforms will use about ₹28,500 crore from the proceeds to redeem RIL’s optionally convertible preference shares, and the balance ₹15,000 crore will be invested in the company, said Anshuman Thakur, Reliance Jio Infocomm’s (RJio) Head of Strategy and Planning. The debt of Jio Platforms is about ₹40,000 crore, Thakur added.
“We will collaborate on many fronts, we will compete on many other fronts,” Facebook India Vice-President and Managing Director Ajit Mohan said, adding the deal was not exclusive.
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