India's richest man Mukesh Ambani may as well be a magician, too.
At the height of global economic financial crisis, Ambani-helmed Reliance Industries' digital subsidiary Jio Platforms is in the midst of an unprecedented investment-attraction spree.
Saudi Arabia’s Public Investment Fund, a global top-line sovereign wealth fund, has announced that it will invest $1.5 billion (Rs 11,367 crore) for a 2.32% stake in Jio Platforms.
This investment values Jio Platforms at an equity value of Rs 4.91 lakh crore and an enterprise value of Rs 5.16 lakh crore.
With this investment, Jio Platforms has raised $15.2 billion (Rs 115,693.95 crore) from ten leading global investors including Facebook, Silver Lake (1 and 2), KKR, Vista Equity Partners, General Atlantic, Mubadala, Abu Dhabi Investment Authority, TPG, and L Catterton in the past nine weeks. Since April 2020. It has sold a total of 24.7% stake in its business.
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Two players in sync
Jio Platforms, with more than 388 million subscribers, has made significant investments across its digital ecosystem, powered by leading technologies spanning broadband connectivity, smart devices, cloud and edge computing, big data analytics, artificial intelligence, Internet of Things, augmented and mixed reality and blockchain.
PIF is the sovereign wealth fund of Saudi Arabia and as part of its mandate to diversify its economy, has made its largest investment into the Indian economy to-date. This investment is in line with PIF’s strategy and mandate of investing in sectors and companies that generate long-term commercial returns to drive Saudi Arabia’s economy.
Mukesh Ambani, Chairman and Managing Director of Reliance Industries, said, “I have greatly admired the defining role PIF has played in driving the economic transformation of the Kingdom of Saudi Arabia. I welcome PIF as a valued partner in Jio Platforms and look forward to their sustained support and guidance as we take ambitious steps to accelerate India’s digital transformation for enriching and empowering the lives of 1.3 billion Indians.”
Yasir Al-Rumayyan, Governor of PIF, commented: “We are delighted to be investing in an innovative business which is at the forefront of the transformation of the technology sector in India. We believe that the potential of the Indian digital economy is very exciting and that Jio Platforms provides us with an excellent opportunity to gain access to that growth. This investment will also enable us to generate significant long-term commercial returns for the benefit of Saudi Arabia’s economy."
The investments in context
The question among most analysts is what does so much investment into Jio Platforms mean.
At one level, it is just simple translation of Mukesh Ambani's stated goal of making Reliance Industries debt-free by March next year. But by the looks of it, the target may be achieved thsi year itself. The money raised so far should go a long way in cutting down Reliance's $21 billion debt bill.
To put in perspective the aggressive path that Jio Platforms is charting out for itself, it has so far lured $15.2 billion in nine weeks, whereas the India’s startup companies in all raised $14.5 billion last year.
This, by all accounts, is astonishing.
From another perspective, it also reflects the attractiveness of Jio Platforms, and by extension Indian market, for these global biggies.
The Indian mareket size, 1.3 billion in actual population, is a major pull for the global investors. And despite the ruling government not covering itself with any great glory in matters of ecconomy, India still stands out as a beguiling investment destination for global corporations.
Especially on the technology front, India offers promise as internet penetration is getting better by the day, and that promises many of these tech investors a chance to up their game further.
Jio is also the trigger for other companies in India to seek out big investors from elsewhere. Bharti Airtel is reportedly in talks with Amazon and Vodafone Idea was said to be negotiating with Google, though the latter one has been denied by the company.
Saudi Arabia's sovereign wealth fund PIF to invest Rs 11,367 Cr in Jio Platforms @reliancejio pic.twitter.com/z4AbJeEJdZJune 18, 2020
Challenge for Jio
Jio Platforms has of course got its task cut out. Having raised so much money it has to deliver what its stakeholders would expect of it.
But before that, some of these deals have to pass muster with the State regulators. Today it has come to light that India's antitrust watchdog is investigating Jio's mega deal with Facebook.
Jio's plan to roll out its Jio Mart in a massive way, banking on WhatsApp's digital payment gateway WhatsApp Pay, has also been delayed.
But sources in the company say these are routine issues, and would be sorted out in due course.
These big ticket investors are thorough professionals and would want Jio to deliver on its promise soon. For that, Jio would have to get its house in order and set right these teething issues.
That road for Jio is long.
(Every company that has invested in Jio Platforms and what it means: Read here.)
