Social media giant Facebook has picked up a 9.99 % stake in Reliance Industries’ Jio Platforms at Rs 43,574 crore ($5.7 billion) making it the largest FDI for minority investment in India.
Jio Platforms is a wholly-owned subsidiary of Reliance Industries Limited that works on digital apps, digital ecosystems and the mobile service.
The investment Facebook put the value of Jio Platforms at Rs 4.62 lakh crore pre-money enterprise value — that is $65.95 billion at a conversion rate of Rs 70 to a Dollar. The first collaboration will happen around the Jio Mart.
This brings one of the world’s largest Internet companies on the table with India’s largest telecom player.
The $5.7-billion deal pushes the Indian conglomerate ahead in its plans of de-leveraging its balance sheet. in August 2019, Reliance Industries Chairman Mukesh Ambani had said the group had prepared a roadmap for becoming a zero net-debt company within 18 months.
It not only marks Facebook’s long-pending formal entry into India’s telecom sector but also catapults it to a place among the biggest foreign investors in India’s technology space.
The arrangement among Reliance Retail, Jio Platforms and Facebook-owned WhatsApp to offer consumers the ability to access the nearest kiranas, or grocery stores, transacting with JioMart using WhatsApp, has come at a very opportune time.
Benefits of this deal:
- At its core, Reliance’s idea is to create an ecosystem, enabling customers to access the local Kirana stores using WhatsApp, combining both offline and online retail.
- This deal will support the Reliance group’s ambitions for JioMart, an internet venture that aims to grant millions of small sellers across India access to a mass market of customers online.
- This strategic partnership with India’s one of the largest telecom operators will be key to India’s future technological plays, particularly in virtual reality (VR) and Internet of Things (IoT), and 5G network.
- India’s internet framework may get a technological boost, and that too reaching citizens in a short time.
- This deal may help in deepening financial inclusion as 400 million users of WhatsApp, may leverage Facebook’s Whatsapp pay-UPI platform.
- Also, because of Facebook’s Libra cryptocurrency service, this deal could be a step further for experimenting crypto-based payments and blockchain technology on a large scale in India.
Issues with this deal:
- This deal raises questions on net neutrality with the possibility of preferential treatment being granted to Reliance Jio. The deal may also open up the entire WhatsApp consumer base to Reliance, which could allow Jio to have an advantage over other telecom players, promoting differential access to its services.
- Facebook’s Free Basics platform was shut down the Telecom Regulatory Authority of India (TRAI) due to net neutrality concerns. In 2015, it experimented with Free Basics, which provided free access to basic Internet services as a partnership with service providers.