Updated: Sep 19, 2020
COVID-19 has offered Reliance an opportunity to become India’s national champion as it has continued to attract a series of high-profile investments amid global pandemic. It signified a testament to India’s huge digital potential and a strong endorsement of Reliance’s subsidiary Jio’s formidable strategy, tech capabilities, disruptive business model and secular long-term growth potential. A-list global tech investors have spent millions of dollars on the Reliance Industries subsidiary which until now pertaining to its unique potential has dominated India’s booming digital economy.
The main reason behind selling Reliance’s stake in Jio was the underlying debt as RIL raised a lot of debt to launch Jio in September 2016. As Jio grew and beat the competition in less than four years, RIL decided to pay off the debt and, if possible, earn some profit by selling a part of its stake. This was also part of RIL's larger plan to become debt-free by March 2021.
First high-profile investment was made by Facebook, the social media giant invested $5.7 billion Facebook i.e. 9.99% equity stake in the company on a fully diluted basis. Talking about the business deal, Facebook CEO and founder Mark Zuckerburg said that the investment has been made because the two companies want to work on major projects that would open up job opportunities for people across India. “India has more than 60 million small businesses and millions of people rely on them for jobs. 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. This is something we can help with -- and that's why we're partnering with Jio to help people and businesses in India create new opportunities.”
Next investment was by the world’s largest tech investor, Silver lake for $1.3 billion that counts up to 2.1% in the Jio Platforms. Silver Lake has a terrific track record of investing in some of the largest and successful tech companies globally such as Twitter, Airbnb, Alibaba, Dell Technologies, ANT Financials, Twitter, Alphabet’s Waymo and Verily, among others. Commenting on the investment, Egon Durban, Silver Lake Co-CEO and Managing Partner, said, “We are excited to increase our exposure and bring more of our co-investors into this opportunity, further supporting Jio Platforms in its mission to bring the power of high-quality and affordable digital services to a mass consumer and small businesses population.”
The third investment after Facebook and Silver Lake came from a US-based private equity firm, Vista Equity, closing the deal at $1.5billion (Rs. 11,367 crores) for 2.32% stake in Jio. Vista's portfolio constitutes more than 60 enterprise software, data and technology-enabled companies all across the globe. Some of its top investments include Solera, Tibco and Inflobox. Founder and CEO of Vista-Equity, Robert F. Smith in his statement said, "We believe in the potential of the Digital Society that Jio is building for the Indian community. Mukesh Ambani's vision as a global pioneer, alongside Jio’s world-class leadership team, have built a platform to scale and advance the data revolution it started. We are thrilled to join Jio Platforms to deliver exponential growth in connectivity across India, providing modern consumer, small business and enterprises software to fuel the future of one of the world’s fastest-growing digital economies."
Vista’s investment showcases Jio as a next-gen software and platform company. It also is an endorsement of Jio’s tech capabilities and the potential of the business model even in this COVID-19 world and beyond. Morgan Stanley acted as the financial advisor to Reliance Industries during the deal.
Next big investment was by Abu Dhabi Investment Authority (ADIA), one of the world’s biggest sovereign wealth funds, which decided to pump $750 million(Rs 5,683.5 crore) into Jio Platforms. The decision by ADIA in exchange for a 1.16% stake, is an unprecedented eighth investment in Jio Platforms in less than seven weeks and marks the largest continuous fundraising action by a company anywhere all across the globe. ADIA's investment in Jio further demonstrates its ability to draw on deep regional and sector expertise to invest globally in market-leading companies and alongside proven partners.
Mukesh Ambani said, "I am delighted that ADIA, with its magnificent track record of more than four decades of successful long-term value investing across the world, is partnering with Jio Platforms in its mission to take India to digital leadership and generate inclusive growth opportunities. This investment is a strong endorsement of our strategy and India's potential." Again, Reliance Industries hired Morgan Stanley's financial assistance to process the deal.
Reliance AGM started with a blast as Mukesh Ambani announced its subsidiary, Jio's investment deal with the tech giant, Google. The $4500 million i.e 7.73% stake investment marked the US technology giant’s biggest-ever investment in an Indian company, as part of Google's commitment towards India Digitization Fund to invest $10 billion in Asia's third-largest economy over the next 5 to 7 years. The chief objective of the strategic partnership with the tech giant is to work on a customized version of the Android operating system to develop low-cost, entry-level smartphones to serve the next hundreds of millions of users.
Google CEO, Sundar Pichai at the 43rd Reliance AGM via a video chat said, "Getting technology into the hands of more people is a big part of Google’s mission, together we are excited to rethink, from the ground up, how millions of users in India can become owners of smartphones. This effort will unlock new opportunities, further power the vibrant ecosystem of applications and push innovation to drive growth for the new Indian economy.”
The Jio-Google massive deal will seek to leverage Jio and Google’s existing digital services to capture the emerging digitization market beyond the current half-billion Internet users in India.
Private equity firm KKR invested Rs 11367 crores in Jio Platforms for a 2.32% stake. KKR made the investment from its Asia private equity and growth technology funds. KKR’s investments include BMC Software, ByteDance and GoJek through its private equity and technology growth funds.“This transaction values Jio Platforms at an equity value of Rs4.91 lakh crore and an enterprise value of Rs5.16 lakh crore. This is KKR’s largest investment in Asia and will translate into a 2.32% equity stake in Jio Platforms on a fully diluted basis,” RIL said in the release.
Abu Dhabi-based sovereign investor Mubadala Investment Company has invested Rs 9,093.60 crores for a 1.85% equity stake in Jio Platforms. Other high profile investors are General Atalantica, TPG, L.Catterton, Qualcomm. Mukesh Ambani’s company will not be the only company to emerge as a winner from COVID-19.
A large chunk of this money will go towards paying off the debt that RIL owes to banks and other lenders. Secondly, the company will use a part of the money to fuel further growth in Jio Platforms, with Mukesh Ambani focusing on data. The recent partnership between Jio’s e-commerce platform (JioMart) and WhatsApp, which has more than 400 million users in India, will give Facebook privileged access to India’s heavily regulated e-commerce and mobile payment sectors. JioMart will also help the US giant access the huge network of small convenience shops, which have delivered essential packages during COVID-19. Foreign players in these segments, including Amazon, Alibaba’s Paytm, and Walmart’s Flipkart, will need to carefully watch this dangerous alliance.
Authored by Puru Jain and Stuti S Gupta, St. Stephen's College