Facebook has paid US$5.7 billion for a 9.99-per-cent stake in Indian telco and e-commerce enabler Jio Platforms, becoming the largest minority shareholder in the Reliance Industries-controlled company.
The size of the investment is reportedly the largest yet by a foreign company into an Indian-controlled company, underlining that the transaction is far more significant than the percentage partnership might at first suggest.
In a statement published online, Facebook chief revenue officer David Fischer and Facebook India VP and MD Ajit Mohan, said one focus of the US company’s collaboration with Jio will be to create new ways for people and businesses to operate more effectively in the world’s fastest-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.”
In less than four years, Jio Platforms has helped nearly 400 million Indians move online, helping create new digital enterprises and connecting them through chat programmes like Facebook’s WhatsApp. About 560 million people nationwide are now online out of a population of 1.387 billion.
“This investment underscores our commitment to India, and our excitement for the dramatic transformation that Jio has spurred in the country,” the Facebook pair said.
Aurojyoti Bose, lead analyst at GlobalData, described the deal, as “a well-devised approach offering a win-win situation for both the companies”.
“India is a key market for Facebook with millions of users and its messaging app WhatsApp also has a huge user base. On the other hand, Jio is one of the largest telecom networks in India with around 370 million subscriber base and the deal can help Facebook in further enhancing its footprint in the country.”
Bose says the deal has become even more crucial for Facebook at a time when WhatApp is preparing to launch a payments app in the country. Jio, as its local partner, will be pivotal in navigating the regulatory hurdles.
“Moreover, encouraged by the growing popularity of TikTok, Facebook has plans to launch video app Lasso, which will benefit from Jio’s huge subscriber base in India.”
Using the JioMart 0e-commerce platform, the two companies will now have a clear path to using WhatsApp as a conduit for online orders, especially important with the advent of the Covid-19 pandemic.
“Jio will benefit from the technology expertise of Facebook,” adds Bose. “In addition, the deal is a step forward towards Jio’s strategy to … become debt free by March next year.”
The size of Facebook’s investment puts Jio Platforms’ valuation at $65.95 billion, making it the fifth-largest company in India in terms of market capitalisation.
Fischer and Mohan, meanwhile, say the rapid adoption of digital technologies by Indians marks “one of the most dynamic social and economic transformations the world has ever seen”.
“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,” they said.