The Knights in Hiding?
Updated: Apr 6, 2022
Known to be a man of his word Mukesh Ambani is tugging at all ends to fulfil his promise of making Reliance Industries debt-free by the start of next year. Signing up Facebook as a minority stakeholder in Jio was a huge move that we didn’t see coming as a way to clear some of that debt. That deal was the medicine India needed to boost its morale and boy, not only Reliance but India too got an overdose of morale. India had once again become the centre of attention of investors and companies looking for a new opportunity. After losing some of the gains it had experienced under PM Modi India was in dire need of a booster. It got one from Japan and the second was a domestic gift, right from the stables of Reliance. Facebook played way out of their usual rule book with this deal by plunging billions for a minority and not a majority stake. This factor made this acquisition even more special as India’s potential was gauged at a wholly different level.
To summarise the deal in a short few lines, Facebook acquired 9.99% of Jio for a whopping $5.7 billion which valued India’s largest telecom operator at a massive $66 billion. With this valuation, Jio got a seat amongst the big players of India Inc. Since the start of the year, Jio has been on fire. In January it officially became the country’s largest telecom operator and it had a stellar Q-4 performance which also helped cover Reliance’s losses. Jio has already started fulfilling some of the responsibilities of being a marquee brand of Reliance. Jio will mark a new era for Reliance and also become the future face of Reliance as oil is slowly phasing out of favour and demand. Last August at the company’s annual AGM Ambani made it abundantly clear that the company will be lowering its dependency on the petrochemicals unit of the business and increase dependency on the retail side of things with Jio and Reliance Retail to generate revenues.
The potential lying in India’s tech sector was made sufficiently clear through this deal. Jio is currently in the best position to capitalise most from the digital boom that we are going through with Facebook and Microsoft in its corner. Jio had last year signed a long term partnership with Microsoft to sell the former’s cloud-based service Azure in the Indian markets. This deal positions Jio way ahead of competitors Bharti Airtel and Vodafone Idea as Jio has made it clear that it won’t just stop at telecom. Jio has a 360-degree approach to its mission and it is currently readying an Amazon rival named JioMart that holds the company’s invitation to the e-commerce arena. The venture just got a major boost through this acquisition as, through this, it gains access to Facebook’s Whatsapp. Whatsapp is a crucial part of JioMart’s ploy against Amazon as the former holds the key to Ambani’s game plan for JioMart. But more on this later.
While this deal holds a lot for Jio and Facebook one question that arises is, “Where does India stand to gain from this formidable partnership?”. Well, for starters, India gets a huge boost of FDI which had been sucked away from it since the onset of Corona in the country. The rupee hasn’t been able to hold it’s own against the dollar lately and an infusion of FDI into the country will surely benefit all of our importers and exporters. Secondly, this deal helps mark India on the world map as being a wondrous investment hub with many untapped opportunities. While this was already out there we needed an endorsement to offset any doubts about our capabilities and with this deal, we got one. Thirdly, the 60 million small business owners in India stand to gain a lot through this deal as the one thing this coalition will be giving us is a suite of tools on Whatsapp that help business owners interact with customers. This will help people grow their business and in consequence help expand the economy. Although all these things won’t happen overnight they will happen soon. Thirdly India’s fledgeling tech sector gets a huge boost through the synergises of expertise and infrastructure that will be borne out of this coalition.
Ambani has always been a pillar of the economy and with this deal, he highlights this more than ever. Getting Facebook has shot our confidence through the sky and opened our eyes to the possibilities that lay ahead which stand to benefit us, the citizens and our country. With this, we will be seeing a much faster digital transformation for our country and that will, in turn, help us get back on our feet after this lockdown much quicker than ever.