Social media giant Facebook will invest $5.7billion (Rs 43,574 crore) in Reliance Jio, the telecom unit of Reliance Industries Ltd(RIL), becoming the largest minority shareholder in the company.
With the investment coming in from Facebook Jio is now evaluated at $65.95 billion. It will help Reliance reduce the debt that it acquired in the process of growing to be the largest telecom company in India.
The investment values Jio Platforms amongst the top 5 listed companies in India by market capitalization, within just three and a half years of the launch of commercial services, said RIL.
This is the second-largest investment Facebook has made in an outside company behind its $22 million in Whatsapp in 2014. And this indicates how crucial market India is for Facebook.
It top’s the chart for the number of Facebook users and it's hard to find anyone with a smartphone not using Whatsapp and this is exactly the pile of data Facebook is trying to monetize even more with this investment in Jio.
Mark Zuckerberg on the announcement of the deal, said “There's a lot going on in the world right now, but I wanted to share an update on our work in India. Facebook is teaming up with Jio - we're making a financial investment, and more than that, we're committing to work together on some major projects that will open up commerce opportunities for people across India."
Contemporaneous to the investment Whatsapp and Reliance have now come together to fast-track Reliance’s new eCommerce platform Jio Mart that the company had been working on for quite some time.
On the other hand, Whatsapp has been testing its Whatsapp pay feature since 2018 but the Indian government introduced privacy-related regulation soon after that prevented it from going live to all users. It has now overcome this regulation and is on the verge to roll out to all its users.
This is even more prominent as it will be deeply embedded with Jio Mart where users will be able to pay at the nearest brick and mortar store using Whatsapp. Whatsapp aims to compete against Google’s successful payment feature Google pay and similar payment solutions like Paytm and Phonepe even after entering very late into the market.
“India is home to the largest communities on Facebook and WhatsApp and a lot of talented entrepreneurs. The country is in the middle of a major digital transformation and organizations like Jio have played a big part in getting hundreds of millions of Indian people and small businesses online.
This is especially important right now because small businesses are the core of every economy and they need our support. 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.” says Mark Zuckerberg.
Thus it is clear that Facebook and Jio are focusing on the small businesses in India and considering the experience that Reliance has in the retail market it wouldn’t be surprising if this project becomes a massive success.
Mukesh Ambani Chairman of RIL said “ The combined power of Jio’s world-class digital connectivity platform and Facebook’s intimate relationship with the Indian people will offer innovative new solutions to each one of you. In the very near future, JioMart – Jio’s digital new commerce platform - and WhatsApp will empower nearly three crore small Indian Kirana shops to digitally transact with every customer in their neighbourhood."
The direct pressure of this partnership would be on Amazon and Walmart’s expansion plans who are popular in metro and tier 1 cities but still have to expand in tier 2 and tier 3 cities which consists of India’s majority of the population. And this is the exact audience Facebook and Jio partnership is targeting.
It is a win-win situation for both Facebook and Jio, Facebook partnering with India’s richest man who is also a close ally of Indian prime minister Narendra Modi and a regular supporter of his policies would come as a perk and help reduce the scrutiny it has been receiving in recent years under Modi governments rule. And for Jio, it will now be able to expand from a totally telecom based company into sectors like eCommerce.