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Facebook invested $5.7 billion in Reliance Industries’ digital technology arm Jio Platforms

April 24, 2020  | Subscribers Only


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Facebook announced a $5.7 billion (INR 436 billion) investment in Jio Platforms, making it the largest minority stakeholder with 9.9% stake. This deal is providing a market valuation of Jio Platforms at the height of $60.3 billion (INR 4.62 trillion), putting Jio Platforms in the top five listed companies in India.

According to Facebook’s media release, India offers an internet user base of 560 million and the rapid adoption of digital technologies means the number is only going to grow. Under the Jio Platforms umbrella, there are services including movie streaming app, e-commerce, digital publication and most importantly, mobile network Reliance Jio which reported 388 million users.

This new transaction underlines Facebook’s commitment to India, and its interest in connecting with more than 60 million small businesses across India. Among other plans, the deal is expected to bring together Jio’s small business initiative JioMart to create a seamless e-commerce mobile experience.

Our analysis

Omdia estimates Facebook India’s advertising revenues had grown from $12 million (INR903 million) in the calendar year of 2012 to $145 million (INR11 billion) in the calendar year of 2019, at a CAGR of 71%. The company’s advertising revenue is projected to cross the mark of $394 million (INR30 billion) by 2024, driven by the overall increased users and advertisers’ engagements on Facebook family apps. These revenues include those generated by displaying ad products on Facebook, Instagram, Messenger, and third-party affiliated websites or mobile applications, and are net of direct cost of sales of an estimated 45%.

With this investment, Facebook is also looking to grow its payment revenues, which at the moment only accounted for 1% of the company’s 2019 total revenues. The investment followed the news that mobile payment app Whatsapp Pay granted approval by the National Payments Corporation to launch in India. According to Facebook, India is its largest market by number of users with 400 million Whatsapp active users reported by July 2019, alongside other key markets Indonesia, Mexico and Brazil. Owning part of Jio will give Facebook direct access Jio’s 388 million subscribers, and the ability to accelerate its establishment in the booming mobile e-commerce market.

Facebook’s commitment to India highlighted the social media giant’s ambition to grow its small businesses user base. By the end of 2019, Facebook reported 140 million small businesses users and India is expected to boost the clientele by almost 50% by offering another 60 million. In addition, there is no better time than investing in the digital economy now, as COVID-19 has forced marketing and business transactions to go online. For small advertisers who cannot afford to buy national TV spots, Facebook family apps will be good destinations for advertising.

For Reliance Jio, this deal is vindicating the decision taken in October 2019 to create a Wholly Owned Subsidiary (WOS) of Reliance Industries, branded as Jio Platforms, and to bring under one roof all verticals of the company’s digital ecosystem: apps (in music, video and news), digital services platforms (in healthcare, education, commerce, government-to-citizen services etc.), cloud services, AI & machine learning, VR & AR, edge computing, Blockchain and language processing & voice enabled services. The main strategic business goal of launching Jio Platforms was to create a company which will attract foreign investment. Mukesh Ambani, Reliance Industries’ CEO, stated that Jio Platforms makes a compelling investment proposition for both strategic and financial investors. The deal with Facebook helps Reliance to serve its huge debt and, more importantly, by partnering with a global brand as powerful as Facebook, the benefit for Jio Platforms is not only financial but also technological and even reputational. India’s huge digital market provides ample opportunities for e-commerce initiatives and for further promoting the digital transformation of the Indian economy. 

The investment is yet another sign of US company’s increased interests in India’s rapid adoption of digital technologies market. This transaction represents the largest Foreign-Direct-Investment (FDI) in the technology sector in India. Companies such as Alphabet, Microsoft and Amazon have been actively investing in e-commerce, logistics and cloud technologies through funding and partnership. In another update from the online video space, Indian media company Eros International had merged with US media company STX Entertainment to serve India, US and China markets. Find out more about the Indian online video market in Omdia’s latest Online Video Market Report - India - 2020

       

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