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11 deals for $15 billion in 10 weeks: Why India’s Jio Platforms is on an investment spree

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Jio Platforms is on a tear.

The telecoms and digital arm of the Indian conglomerate Reliance Industries Limited (RIL) has raised $15.2 billion in 11 deals over two months amid a worldwide pandemic.

“RIL seems to have mastered [dealmaking] better than anyone else,” Sanchit Vir Gogia, CEO of digital advisory Greyhound Research, said in a note this month. “It’s hard to find a parallel to this anywhere else in the world.”

The fundraising flurry began with a blockbuster announcement on April 22 that RIL was selling a 10% stake in Jio Platforms to Facebook for $5.7 billion. Jio Platforms made subsequent deals with U.S. private equity firms KKR, Vista, General Atlantic, TPG, L Catterton, and Silver Lake, whose deal has two parts. It also secured investment from United Arab Emirates funds Mubadala and the Abu Dhabi Investment Authority. In the most recent deal, Jio Platforms announced that Saudi Arabia’s sovereign fund will invest $1.5 billion for a 2.3% stake in the company. After the Saudi deal, RIL claimed on Friday that it is now ‘net-debt free,’ a feat it achieved nine months earlier than expected.

All told, RIL has sold 25% of Jio Platforms, and could soon part with another stake, as it reportedly considers a deal with either Google or Microsoft. Both are reportedly vying to buy a 6% share in the company. (Google and RIL did not return Fortune‘s requests for comment and Microsoft said it didn’t “have anything to share” about a potential deal.)

In addition to paying off debt, the capital will likely be used to prepare for an overseas IPO for Jio Platforms, says Ambareesh Baliga, an independent stock markets analyst in Mumbai. Analysts predict the company could debut at a valuation of $100 billion. Currently, Jio Platforms is not listed on any stock exchange; its parent is listed in Mumbai and New York.

The pandemic seems to have accelerated the ambitions of chairman and managing director Mukesh Ambani, Asia’s richest man, who wants to transition his RIL conglomerate away from oil toward digital industries. But whether Jio Platforms can ride its recent investment wave to become India’s first bonafide tech giant will depend on whether the telecoms operator can morph into a digital empire powerful enough to beat out stiff competition in India and from abroad.

From textiles to telecoms

Ambani’s father, Dhirubhai Ambani, founded Jio Platforms’ parent company, RIL, as a textile manufacturer in 1973. Through the 1970s and 1980s, the senior Ambani expanded the business into producing chemical precursors for the textiles and, eventually, into petroleum.

Mukesh Ambani (right) with his brother Anil in Mumbai in 2006.
Bhaskar Paul/The The India Today Group via Getty Images

At the time of the patriarch’s death in 2002, RIL was India’s largest conglomerate, with the majority of its revenue coming from its oil division. His passing sparked a fierce battle over the company between his two sons, Mukesh and his brother Anil. The siblings eventually agreed to split control of the empire in a 2005 deal brokered by their mother. Mukesh took control of RIL’s oil assets, and Anil got the company’s telecoms divisions.

The truce proved temporary.

In 2010, Mukesh reentered the telecoms space by purchasing a small mobile telecoms network operator called IBSL. Mukesh would later use IBSL as a vehicle to buy the rights to wide swaths of India’s bands in government-run spectrum auctions, eventually running his own brother out of the telecoms business in 2018.

Data is the new oil

After purchasing spectrum rights early last decade, RIL’s forays into telecoms and digital industries ramped up in earnest in September 2016, when its subsidiary, Reliance Jio Infocomm, launched 4G services in India. The company claims to have attracted 100 million subscribers in its first six months and has amassed 388 million subscribers as of April 2020, according to RIL financial statements.

A company restructuring in November 2019 saw RIL bring all its digital initiatives—including Reliance Jio Infocomm—under the new Jio Platforms umbrella.

“In this new world, data is the new oil. And data is the new wealth,” chairman Ambani said last year.

Capitalizing on a crisis

As the coronavirus pandemic struck India, it created conditions conducive to RIL’s digital push. India was under complete lockdown for roughly a month starting in late March, and is now engaged in a partial reopening as COVID-19 cases continue to spike across the country.

“COVID-19 lockdown has forced even the non-tech savvy Indians to move online,” said Baliga. India’s government reported that Internet usage surged by more than 13% during the lockdown. “In normal circumstances this could have taken a few years to shift, but it happened in a few weeks,” he said.

RIL has raised over $15 billion dollars from 11 investors in the last two months through selling stakes in Jio Platforms; Silver Lake’s deal has two parts

The lockdown Internet boom, paired with a global downturn in oil prices, saw Jio Platforms in late April become nearly as valuable as all of RIL’s other properties combined. Recent investment deals have valued Jio Platforms at $65 billion, whereas RIL’s total market capitalization on the Nasdaq is $133 billion.

Facebook’s investment helped boost the company’s overall value. Shares in RIL jumped over 8% on the New York stock exchange following the April deal. The Facebook deal appealed to investors since it allows Jio to leverage the Facebook-owned WhatsApp’s wide reach in the Indian market. That synergy is now under investigation, with India’s antitrust watchdog probing the deal for potential anti-competitive conduct, according to Bloomberg. As of now, there is no timeline for the watchdog’s decision.

A digital empire?

Jio Platforms’ telecoms services have the largest subscriber base among providers in India, but its other digital initiatives remain in early stages of development.

Telecom And Retail Gains Give Boost to Reliance Industries
A worker transports tires on a bicycle past a Jio store in Mumbai, India in 2020.
Dhiraj Singh/Bloomberg via Getty Images

JioMart, an e-grocery delivery platform, launched limited services in January. The company aimed to use Reliance Retail, an RIL subsidiary with 12,000 stores in over 6,600 towns and cities across India, and a network of local corner stores across the country as the backbone of its e-commerce ambitions. Days after Facebook’s investment, Jio Platforms announced that customers could place grocery orders via the Facebook-owned WhatsApp messaging service, a useful tool for home-bound consumers. But Jio Platforms had to temporarily suspend the WhatsApp service this month after orders went unfilled due to a shortage of delivery drivers.

E-commerce is the company’s most promising frontier because 90% of India’s massive and diverse retail sector remains offline, says Amitendu Palit, a senior research fellow at the NUS Institute of South Asian Studies in Singapore.

But before Jio can become India’s ‘everything store,’ it will have to out-maneuver foreign competitors and local companies backed by deep-pocketed outside investors. Established e-grocery players, Alibaba-backed BigBasket and the northern India-based Grofers, reported a surge in sales amid India’s lockdown. Meanwhile, Amazon and Walmart-backed FlipKart are smaller players in the grocery space but continue to dominate India’s e-commerce sector generally.

The ‘depth to do it’

Still, Jio may be better poised than others to digitize India’s retail space.

“There’s a great amount of effort that needs to be put into digital literacy, and digital businesses, across a vast segment of unorganized sector operators,” said Palit. “Reliance is probably the only company in India that actually has that kind of breadth and depth to do it.”

In its quest for tech dominance, Jio Platforms is also counting on the success of a suite of Jio mobile apps, including music streaming service JioSaavn, digital currency JioMoney, and video-conferencing platform JioMeet, which garnered 100,000 downloads in the run-up to its official release.

Digital Payment Imagery As Governments Push For E-Payments Continues
Signage for digital payment service JioMoney, operated by Reliance Jio Infocomm Ltd., is displayed at the entrance to a general store in Bengaluru, India in 2017.
Dhiraj Singh/Bloomberg via Getty Images

These software capabilities, combined with Jio’s vast telecom subscriber base and a network of physical retail outlets, may uniquely position Jio to dominate India’s digital sphere—or so Jio’s new investors would like to believe.

“Few companies have the potential to transform a country’s digital ecosystem in the way that Jio Platforms is doing in India, and potentially worldwide,” Henry Kravis, co-founder of KKR, said in a statement announcing the firm’s investment.

“Jio is a disruptive industry leader that is empowering small businesses and consumers across India by providing them with critical, high-quality digital services,” Jim Coulter, co-CEO of TPG, said in a statement announcing his firm’s deal.

Yet competition is likely to stiffen as American tech giants eye the telecoms sector as a launchpad to strengthen their foothold in India’s growing digital market.

Amazon, for instance, is reportedly in talks to buy a 10% stake in Bharti Airtel, India’s third-largest telecoms operator. Google, in addition to its reported interest in Jio, is considering taking a 5% stake in Vodafone Idea, India’s No. 2 telecoms company behind Reliance.

However, as a vast conglomerate with many retail outlets, RIL give Jio Platforms a “strong local ground presence” in communities across India, said Palit. Using this network as a base, the company says Jio Platforms aims to include millions of small merchants, micro-businesses, and farmers in its digital network. Facebook CEO Mark Zuckerberg said in April that he’s partnering with Jio Platforms for access to the “60 million small businesses [in India] and the millions of people rely on them for jobs.”

Jio has a long way to go before becoming a global tech giant, Palit says, but Jio’s local focus gives it an advantage in tapping into India’s vast offline market. “Where else in the world now today can you expect to see this kind of digital growth?” he said.

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