#BLockbuster FDI Deal : Facebook Buys 9.99% Stake In Mukesh Ambani’s Reliance Jio for Rs 43,574 cr

At a time when the world and India are battling the dreaded coronavirus , a blockbuster FDI deal has just been inked.  Facebook in landmark statement has announced an investment of $5.7 billion (Rs 43,574 crore) to buy a 9.99 per cent stake in the firm that houses billionaire Mukesh Ambani’s telecom arm Jio as the social media giant looks to expand presence in its largest market in terms of subscriber base.

“Today we are announcing a $5.7 billion, or Rs 43,574 crore, investment in Jio Platforms Ltd, part of Reliance Industries Ltd, making Facebook its largest minority shareholder,” the company said in a statement.

Reliance in a separate statement said the 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 per cent equity stake in Jio Platforms on a fully diluted basis,” it said.

Jio Platforms, a wholly-owned subsidiary of Reliance Industries Ltd, houses digital services of the group.
Reliance Jio Infocomm Ltd, with 388 million subscribers, is a wholly-owned subsidiary of Jio Platforms.

The Facebook deal is part of value unlocking by RIL to cut debt. RIL has been seeking strategic partnerships across its businesses while targeting to deleverage its balance sheet.

It has been talking to Saudi Aramco for sale of a 20 per cent stake in its oil-to-chemical business for an asking of $15 billion.

RIL has already tied up with BP Plc for fuel business as it targets to have a debt-free status by next year.

Jio had also been reportedly talking separately to Google but the fate of those discussions is not known.

The latest deal is a win-win for both Facebook and Jio.

It would give Facebook deeper access to India, the second largest internet market after China.

Facebook already has 400-plus million Whatsapp users in India and is looking to launch a payment offering.

Having a local partner could help it in navigating various regulatory issues, including those related to privacy and local storage.

Also, having a good telecom partner could help Facebook improve its reach to masses.

From an RIL perspective, it could leverage on Facebook’s technology expertise and talent pool as well as help in its ambitions to make Jio a digital company. This apart, the deal would aid the company achieving zero debt status by March 2021.

Since launching Jio in 2016, RIL has emerged as the only Indian company capable of competing with United States tech groups in the fast-growing Indian market, expanding from mobile telecom into everything from home broadband to e-commerce.

Jio has emerged as the number one telecom operator in India, both in terms of traffic as well as revenue in a virtual two-player market since the third player, Vodafone-Idea is struggling under regulatory burden.