The Jio Facebook deal
Reliance Industries is the largest private sector company in India, with a market capitalization of over $150 Billion, though it still had a debt of around $21.29 billion. Mukesh Ambani promised his investors that he’d make Reliance net debt-free
by March 2021. Then came the blitzkrieg. In 3 months, Reliance Industries and Reliance Jio Infocomm Limited (aka JIO) raised $23.15 Billion, making Reliance net debt-free. The capital was raised by a rights issue and 10 deals in which Reliance sold a 24.7 % stake in JIO. Out of these 10 deals, the JIO Facebook deal was the biggest and most significant strategically. (the others being private equity deals made only for investment purposes)
In this article, we’ll cover only the JIO-FB deal. On April 22nd, RIL announced that Facebook would be investing $5.76 billion in Jio Platforms, for a 9.99% stake, valuing JIO at $66 Billion. This was the biggest minority stake deal ever! So what’s in it for JIO? More importantly, what’s in it for FB?
India has more than 500 million users on Facebook, Instagram, and Whatsapp (all owned by FB), making India one of its largest customers. Facebook has been trying to dominate the Indian social media market since forever. In 2015 it had launched free
basics, which offered free internet to its customers. But there was a catch. The only free thing was accessing Facebook-owned websites. This caused a lot of outrage among the pro-net neutrality population, and eventually, the Indian telecom regulator banned free basics in 2016. If only there were a way for FB to enter the Indian market again, then JIO happened. Their dirt-cheap internet packs brought in about 350 million users. But all things come at a cost; Jio had amassed a hell lotta debt. And as mentioned earlier, Mukesh Ambani promised to make RIL debt-free.
As part of the deal, JIO will use a part of the capital to repay its debts. Facebook, on the other hand, will get an easy route into the Indian internet market, not having to deal with the strict regulators. A little while ago, FB had tried to launch Whatsapp pay but couldn’t get past the regulators. Jio has started an early stage, “jiomart.” Think about what FB and JIO could do together. Let’s take a bit of a diversion here. We all have heard of WeChat, the Chinese messaging app.
