US social media giant Facebook will invest Rs 43,574 crore into Jio Platforms, a unit of Reliance Industries for a 9.99% stake, a development which on Wednesday boosted the shares of India’s oil-to-retail conglomerate over 8% in early trade.
The investment will value Jio Platforms - a digital apps platform - at Rs 4.62 lakh crore. The deal with help Mukesh Ambani-owned RIL reduce debt further and allow the Mark Zuckerberg-led company get a stronger foothold in what is the US major’s largest market.
Both companies, in separate statements, said that they will work together on some major projects that will open up commerce opportunities for people across India.
“Reliance Industries Limited, Jio Platforms Limited and Facebook, Inc. today announced the signing of binding agreements for an investment of Rs 43,574 crore by Facebook into Jio Platforms,” RIL said in a statement on Wednesday.
“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% equity stake in Jio Platforms on a fully diluted basis,” the oil to telecom business house added.
Reliance Jio - RIL’s telecom unit with 388 million subscribers - will continue to remain a wholly owned subsidiary of Reliance Platform. RIL said that this was 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.
In early trade Wednesday, the RIL stock was up 6.8% at Rs 1,320.55 on the BSE.
“At the core of our partnership is the commitment that Mark Zuckerberg founder of Facebook, and I share for the all-round digital transformation of India and for serving all Indians…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,” said Mukesh Ambani chairman and MD of RIL in the statement.
In a separate statement, Facebook said the deal underscores its commitment to India. India is the biggest market for Facebook with 328 million monthly users and the company’s WhatsApp messaging app has 400 million users in the country, also the most in the world.
“This is especially important right now, because small businesses are the core of every economy and they need our support. India has more than 60 million small businesses and millions of people rely on them for jobs,” Zuckerberg said in a Facebook post.
“With communities around the world in lockdown, many of these entrepreneurs need digital tools they can rely on to find and communicate with customers and grow their businesses,” he said. “We’re looking forward to getting started”.
The main focus of the deal is to come up with digital based solutions for 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.
Concurrent with the investment, Jio Platforms, Reliance Retail 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.
“In the very near future, JioMart – Jio’s digital new commerce platform, and Whatsapp – will empower nearly 3 crore small Indian Kirana shops to digitally transact with every customer in their neighbourhood. This means all of you can order and get faster delivery of day-to-day items, from nearby local shops,” Ambani said.
He added that at the same time, small kiranas can grow their businesses and create new employment opportunities using digital technologies.
“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,” Facebook said.
It added that the focus of the tie up will be to create 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.”
Morgan Stanley as financial advisor and AZB & Partners and Davis Polk & Wardwell as counsels advised on the transaction.