Even though Polygamy is illegal in India since 1956, Jio Platforms has tied knots (partnerships) with more than 10+ investors in 2020, the year where number of marriages (fundraising) have taken a steep blow due to the emergence of global pandemic.
Reliance Industries has raised more than INR2.0 lakh crores in the past six months, which includes INR1.5 lakh crores from sale of stake in Jio Platforms and INR53k crore from world’s largest rights issue by a non-financial enterprise. These numbers mean little, unless we give a comparative viewpoint. Therefore, below is a quick comparison:
- Money raised by RIL is equivalent to 1% of India’s FY20 Nominal GDP
- Approximately equal to Government of India’s INR2.1 lakh crores disinvestment target
- RIL’s INR1.5 lakh crores stake sale to investors alone formed 40.6% of India’s total FDI inflows in FY20
We believe polygamy with 13 investors for a total 33% stake sale in Jio Platform was not the RIL’s first choice for her youngest daughter (Jio). However, after RIL’s eldest daughter (Petrochemical Segment) failed to attract the Saudi’s rich Sheikhs (Saudi ARAMCO) for a $15.0bn deal, it was left with no choice in its desperate attempt to make the behemoth a net debt-free organisation.
Amongst all the investors Facebook and Google, are the dearest son in law for RIL as it offered them a discount in the stake sale. Stake sale to Facebook was done at valuation of INR4.62 lakh crores while to Google valuation offered was INR4.36 lakh crores, compared to INR4.91 lakh crores for all other grooms. The sole reason for discounted valuation to Facebook and Google was their role in the Polygamy which is much more than an investor. Jio aims to leverage and source their technology to become Queen of the world’s youngest demography.
Both Facebook and Google are arch rivals in various segments. Facebook aims to counter Google Pay via its WhatsApp Pay and Youtube via Facebook Watch, however an attractive bride (Jio) forced them to join hands. Interestingly, Facebook was unhappy with the Jio Platforms partnership with Google, nonetheless it had to only sit and watch as the bargaining power was with the bride (Jio) this time, in a patriarchal country.
So now, let’s understand why investor’s (in particular Facebook and Google) became so much interested in Jio Platforms:
- RIL is always on the right side of regulation. Partnership with Jio is like marrying a top bureaucrat’s daughter. It is astonishing that none of the regulatory watchdogs (SEBI, CCI, RBI, etc.) raised any query over the stake sale. In contrast, Flipkart-Walmart $16.0bn in 2018 faced numerous hurdles. We can attribute much of the Jio’s telecom success to TRAI’s favourable policies for the India’s largest/youngest service provider. Facebook has faced lot of regulatory hurdles to get approval for its WhatsApp Pay, which may change after its tie up with Jio. Similarly, Google is also looking to resolve the antitrust investigation it is facing in the country, by forging a partnership with bureaucrat’s daughter (Jio).
- The ban on Chinese apps presents an opportunity for Jio along with Facebook and Google to tap into the India’s billion dollars app market. Facebook and Google, are banned in China and their home market US is near saturation. Hence, growth for their business lies in India only, which has become a data hungry country.
- Rise in India’s protectionism, and growing voice for storing nation’s data locally is a potential threat to Facebook and Google. A personal data protection law and an e-commerce policy are already in the draft stage in India. Partnership with Jio, will help the technology giants to become Local.
- Jio has a proven track record and became India’s largest telecom provider in less than 4 years, which has surely acted as a magnet to lure investments. In uncertain times and after having burnt their hands in startups, investors now seek companies with established success stories.
- Liquidity punch by global central banks have flushed the private equity firms with money, which were already sitting on pile of cash seeking profitable investments. Jio came as perfect bet to use the sitting gun powder, which would have otherwise attracted low interest rates.
Overall, the stars are currently in favour of Motabhai, who has perfectly capitalised the opportunity. Although the success of Jio as a technology behemoth is yet to be seen, its failure seems highly unlikely.
Source: ET, Financial Express, Scroll, BusinessLine & Moneycontrol.
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