Unpacking Facebook’s Deal with Reliance Jio Platforms

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Unpacking Facebook’s Deal with Reliance Jio Platforms

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Unpacking Facebook’s Deal with Reliance Jio Platforms
The day opened with the news of Facebook’s mega-investment into Jio Platforms, a wholly-owned subsidiary of Reliance Industries Limited (RIL). For the princely sum of $5.7 billion, or roughly INR 43,000 crores, Facebook will acquire a 9.9% stake in Jio Platforms at an enterprise valuation (EV) of roughly $65 billion. Out of these funds, roughly 65% will reportedly be used to redeem optionally convertible preference shares (OCPS) of Jio’s parent company, Reliance Industries Ltd (RIL), as well as pare down debt. Jio Platforms is an umbrella entity created in October 2019 by RIL with an equity infusion, after much corporate “restructuring” that was designed to effectively demerge Reliance Jio and several digital businesses from the core business. RIL went further in ensuring that Reliance Jio, the telecom entity, was separately incorporated from the digital businesses to ensure that revenues from the digital business would not come under the purview of its license fee obligations to Government. The digital businesses include JioSaavn (music), JioCinema (movies), JioPay (payments), and others.

Contents

Key takeaways

Introduction

Facebook’s India 2.0 strategy focuses on commerce, not on social

Jio needs Facebook to pare down debt but also to reboot its digital strategy

Both players have zeroed in on “commerce” for their mutual second acts

A looming privacy nightmare for India

The cat amongst the pigeons will prompt realignment for some and survival angst for others