Mukesh Mark, and Money
With the investment, Facebook will hold a 9.99 percent stake in Jio Platforms making it the largest foreign direct investment for a minority investment in India.
On 22nd April, Mark Zuckerberg’s American social media giant Facebook announced signing a Rs 43,574 crore ($5.7 billion) deal with Mukesh Ambani-led Jio Platforms Limited. With the investment, Facebook will hold a 9.99 percent stake in Jio Platforms making it the largest foreign direct investment for a minority investment in India.
This move comes as a relief to the stakeholders of RIL, which had invested nearly Rs 4 lakh crore since 2010 to create the Jio digital ecosystem. According to experts, after the capital gains and income tax, the final realisation from the deal will be roughly Rs 38,000 crore. “It will be almost the same as the investment that RIL made to create the asset, without any premium,” a tax expert said. This deal will help RIL to resolve its net debt, which stood at Rs 1.53 lakh crores on 31st December 2019, and is a step further in its plan to be a net debt free entity by 31st March 2021.
Financial experts are also predicting a boost in adoption of cryptocurrency and growth of blockchain technology in India after the company’s last annual general meeting in August, where Mukesh Ambani announced building the world’s largest blockchain network with tens of thousands of nodes. Such a network could be used to provide rewards and discounts under the various entertainment and telecom businesses operated by RIL. Facebook’s permissioned blockchain cryptocurrency called Libra seems to be the perfect match for such a large-scale implementation.
Jio’s retail venture, JioMart, that would provide product and services by accepting orders on WhatsApp is further expected to give tough competition to product delivery companies like Amazon and Flipkart and online grocers like Grofers and Bigbasket. On 26th April, JioMart Platforms started testing its WhatsApp-based online shopping portal. The service so far is available in Navi Mumbai, Thane, and Kalyan and is expected to expand to different states in the country.
The Facebook-Jio deal can act as a paramount example for promoting ‘Ease of doing Business’ in India, at a time when MNCs are shifting their base from China. It has the potential to propel the cycle of Digitisation in India making Prime Minister Narendra Modi’s ‘Digital India’ initiative more realisable. The 60 million small and medium scale businesses present across India, that have suffered greatly in the wake of the coronavirus spread, can expect to benefit from such a venture, if implemented fruitfully at a macro level. These sectors account for the majority of jobs in rural and urban areas, hence supplementing millions of lives connected with it.
RIL has also announced to sell 1.15% stake in JPL to private equity investor Silver Lake Partners for Rs 5,655.75 crore($750 million) and Vista Equity Partners for Rs. 11,325 crore($1.5 billion) both of which represent a 12.5% premium to the equity valuation of the Facebook investment.
This deal spree from RIL can be attributed to its necessity to cut down debt and arrange funds at the same time due to the sharp decline in profits arising from the petrochemical business because of the crash in oil prices worldwide.