The plight of small and medium-sized businesses is due to the pandemic, where owners of large companies providing consumption-based products, including telecom and e-commerce, have expanded their business. One of them is Reliance Industries Ltd., where the Owner is Mukesh Ambani. Mukesh Ambani is now the talk of the town of all the local and foreign news channels starting from Facebook, Instagram or other social media. During this pandemic, he has been included in the top five richest people in the world. From April 22nd, 2020 to July 15th, Reliance’s Annual General Meeting, a total of 13 companies have joined Reliance’s Digital Platforms, Jio Platforms Ltd. – has announced to invest in. Mukesh Ambani has completed more than 1 deal per week since the AGM several weeks ago. Why are the world’s largest companies suddenly investing in Jio Platforms? We will discuss these issues in this article.
Jio Platforms Ltd is one of the digital business subsidiaries of Reliance. In October 2019, Reliance established Jio Platforms as part of their digital transformation. While Reliance Jio, a telecom subsidiary of Reliance, was in talks for various reasons, other digital businesses were in the background. Finally, last year Reliance decided to do business as a separate digital business subsidiary by incorporating their telecom business and other digital businesses on the same platform.
Companies Under Jio Platforms
Reliance Jio Infocomm Ltd.
Due to various family and business quarrels with his elder brother Anil Ambani, Mukesh Ambani was barred from entering some other businesses including Energy and Telecom due to a non-compete agreement. Meanwhile, the state of Anil Ambani’s energy and telecom business was fragile. Mukesh Ambani did not want to miss the opportunity. A few days before the auction of Broadband Wireless Access’s 4G licenses in India in 2010, Mukesh Ambani came forward to save his elder brother’s sinking energy business. In return, he canceled the non-compete agreement established in 2005. As a result, there was no obstacle for him to enter the telecom business. Infotel Broadband Services Ltd., an unnamed broadband company bought the spectrum for Rs 12,848 crore or 2.7 billion USD in the auction of 4G licenses. Hours after the auction, Mukesh Ambani bought a 95% stake in the company. In January 2013, Infotel Broadband was renamed Reliance Jio Infocomm Limited or Reliance Jio (RJO). Later, Jio started the business in 2015 on a small scale and with full emphasis as a telecom subsidiary of Reliance.
Jio’s super app is MyJio, which means customers get many services at once in this app. Basic telecom services like fixing voice and data plans, recharging, bill payment, listening to music, watching movies, TV shows are also available in this ‘Super App’. The MyJio App surpassed 100 million downloads in just one and a half years after coming to the Play Store in 2016. In January 2020 a feature called ‘Jio Mini Apps’ was introduced in the MyJio app where some more services of Jio Platforms like – JioCloud, JioTV, JioCinema, JioEngage etc. are integrated. On the same day, Jio became the first telecom operator in India to offer this payment service by launching UPI payment in the MyJio app. Inter-bank transactions can be done instantly on the mobile platform through UPI or Unified Payment Interface. In this case, it is better to say, Jio will have to compete with top players like Google Pay, Paytm, Phone Pe, etc. to get a transaction as a UPI payment provider.
JioTV & JioTV +
Reliance enters the streaming service industry through JioTV and JioTV +. Through JioTV, Jio’s customers can watch various television channels and programs on smartphones and tablets. JioNews is an online application of Jio Platforms with news channels more than 600 magazines and more than 300 newspapers.
Services including Jio Cloud Storage, Data Backup and File Transfer Services are under Jio Cloud.
Services including Jio Cloud Storage, Data Backup and File Transfer Services are under Jio Cloud.
It supports 4G-HD voice calls and video calls on 2G, 3G and 4G-LTE supported smartphones. Rich Communication Services also allows you to enjoy a number of services including location sharing, doodle editing, and group chatting while on the call.
JioMart Through this, Reliance entered the e-commerce business this year. Small and medium e-commerce merchants will register through this shopping portal and sell products with orders from the WhatsApp Business App. Buyers will be able to order products through WhatsApp. Another e-commerce giant, Amazon, has already given a hint to invest in JioMart.
Jio is coming with data calling, video calling, and chatting facility. Jio also offers video conferencing and web conferencing services through JioMeet.
Moreover, Jio has been able to do strong brand positioning by providing various services like JioHealthHub, JioSecurity, JioSwitch, JioBrowser, JioMoney. Notable among these are Jio Merger & Acquisitions, online music streaming service platform JioSaavn, digital education platform Jio-Embibe and software solutions company Jio-Radisys for 5G and IoT-based services.
Timeline of Jio Investment Mania
Now let’s see which companies have invested in Jio.
● On April 22, 2020, social media giant Facebook announced an investment of Rs 43,574 crore or 5.7 billion USD in Jio Platforms, equivalent to a 10% stake in the platform. It is the largest Foreign Direct Investment (FDI) in India’s tech sector.
● On May 2, tech sector investment firm Silver Lake Partner announced an investment of Rs 5,656 crore or 0.7 billion by buying a 1.2% stake in Jio Platforms.
● On May 8, the US-based private equity firm Vista Equity Partners announced the purchase of a 2.3% stake in Jio Platforms, valued at Rs 11367 crore or 1.5 billion USD.
● On May 17, General Atlantic announced an investment of Rs 6598 crore or 0.9 billion USD by buying a 1.3% stake in Jio Platforms.
● On May 22, another US-based private equity firm, KKR & Co., announced the purchase of a 2.3% stake in Jio Platforms, valued at Rs 11367 crore or 1.5 billion USD.
● On June 5, Mubadala Investment Company, an Abu Dhabi-based Sovereign Investor announced an investment of Rs 9,094 crore, or 1.2 billion USD in Jio Platforms, equivalent to a 1.9% stake. On the same day, Silver Lake Partner announced the purchase of a 0.9% stake with an additional investment of Rs 4,547 crore.
● On June 7, the Abu Dhabi Investment Authority (ADIA) announced an investment of Rs 5684 crore, or 0.7 billion USD, by buying a 1.2% stake in Jio Platforms.
● On June 13, TPG, an alternative asset company, announced an investment of Rs 4,546 crore or 0.7 billion USD in Jio Platforms, equivalent to a 0.9% stake in the platform. On the same day, consumer-focused private equity firm L Catterton announced it would buy a 0.4% stake in an investment of Rs 1,895 crore.
● On June 18, Saudi Arabia’s public investment fund bought a 2.3% stake in Jio Platforms, announcing an investment of Rs 11367 crore or 1.5 billion USD.
● On July 3, the world-renowned chip-producing company announced the purchase of a 0.4% stake in Intel’s investment subsidiary, Intel Capital, Jio Platforms, with an investment of Rs. 1895 crore or 0.6 billion USD.
● On July 12, world-renowned semiconductor and wireless technology-related service provider Qualcomm’s investment subsidiary, Qualcomm Ventures, announced the purchase of a 0.2% stake in Jio Platforms with an investment of Rs. 730 crore or ০ 0.1 billion USD.
● Finally, on July 15, the day of Reliance’s AGM, the world-renowned company Google announced the purchase of a 7.7% stake in Jio Platforms, valued at Rs 33,737 crore or 4.4 billion USD, the second-highest of these 14 investment deals. A day before the announcement, the CEO of Google’s parent company Alphabet, Mr. Sundar Pichai announces 10 billion investment in India over the next 5-6 years.
A total of eight private equity firms announced to invest 6.9 billion in Jio Platforms, which is more than the investments from Facebook and Google by 40% and 80%, respectively.
Products & Services from the Investments
In this section, you’ll know about the products or services that Jio has invested in.
Jio-Facebook: In December 2019, Jio launched a limited number of activities on their online e-commerce platform JioMart. And a couple of days after the announcement of the investment from Facebook, JioMart made its debut online. Facebook’s investment in Jio allowed the social media giant to participate in India’s e-commerce business. Although Flipkart holds 70% of the Indian e-commerce sector, it faces regulatory restrictions due to its ownership of Walmart. In this case, being a domestic company, Jio will get a relatively favorable environment due to government loyalty.
Jio-Google: Google has announced plans to invest in Jio to reach low-cost smartphones to many of India’s needy people. The company announced its 10 billion investment in India through a digitization fund called “Google For India”. The 4.5 billion awaiting investment in Jio is part of that fund. Google’s goal is to quickly capture the smartphone market by delivering affordable smartphones to Jio’s nearly 400 million telecom service subscribers.
Jio-Silver Lake: Silver Lake, a US-based private equity firm, is widely known for its investments in the technology sector. According to the latest updated data, the company’s Asset Under Management (AUM) is about 40 billion. Silver Lake has invested in Twitter, Alibaba, Ant Financial, Dell and other leading tech companies. Silver Lake earns about 4 billion USD a year from these investments. Silver Lake holds the record for the most successful exit deal in private equity investment by buying Skype from eBay for 1.9 billion USD in 2009 and selling it to Microsoft for 6.5 billion in 2011. The company made its first investment in India in 2013.Silver Lake invested a total of Rs 1,0202.55 crore in Jio Platforms, which is equivalent to 2.08% stake in the platform.
Jio-KKR: KKR, a New York-based private equity firm founded in 1986, has invested more than 30 billion USD in more than 20 tech companies. These include BMC Software, TikTok’s parent company ByteDance, Gojek etc. Deal with Jio is KKR’s largest investment in Asia.
Jio-General Atlantic: The investment portfolio of General Atlantic, another New York-based private equity firm, includes companies in the healthcare, financial services, and technology sectors. The firm has invested in Uber, Airbnb, Alibaba, ANT Financial, ByteDance, Box, Snapchat, and Facebook. Apart from Jio, General Atlantic has also invested in India before. Bangalore-based apartment renting startups NoBroker, Education Tech or Edtech companies Unacademy and Byju’s, payment processor company Billdesk and National Stock Exchange of India (NSE) are in General Atlantic’s portfolio.
Jio-Qualcomm: Jio has sold shares to Qualcomm Ventures to implement plans to establish 5G infrastructure and provide additional services. Jio 5G Technology will get support from Qualcomm Inc. to roll out.
Jio-Intel: Jio will also get support from Intel in case of 5G technology rollout. Intel will also work on applying Artificial Intelligence (AI), Internet of Things (IoT) in various products and services of Jio. Jio also plans to sell laptops and tablets in the future. For which the company will work jointly with Intel.
Jio-Vista: Through Vista’s investment, Jio will have the opportunity to apply various advanced technologies including AI, IoT, Blockchain, Augmented Reality (AR) / Virtual Reality (VR) to their platforms, products and services.
Behind the Mania
Why so many big investments in just 3 months? Why did Jio sell about a third of the shares of their platform? Let’s look at the reasons behind
- Jio was already on the white list of investors, especially private equity investors, for several reasons; And those are – Jio’s dominance in a market of 1.3 billion people, a debt-free portfolio, and a secure position in regulatory terms. Also, the launch of Jio Platforms last year was one of Jio’s masterstrokes. Jio has also been able to grow customers rapidly in online and technology-based businesses due to the coronavirus. For these reasons, Jio has been able to attract investment from several large companies.
- Jio is no longer just a mobile network operator. It is a full-fledged tech company entering almost all types of digital businesses. And for all these reasons, Jio Platforms has received higher valuation from investors. Private equity firms valued the platform at around Rs 4.9 trillion for its equity, while Facebook and Google valued around Rs 4.4 trillion. The enterprise value of the entire platform stands at 5.2 trillion rupees (private equity firms) and 4.6 trillion rupees (Facebook and Google), respectively, which is 6.7-7.5x of the platform’s sales and 20.4-22.8x of EBITDA. It is better to say here, Enterprise Value or Firm Value = Market Value of Equity + Market / Book Value of Debt – Cash; EBITDA = Earnings Before Interest, Tax, Depreciation & Amortization.
|Investor||Amount (In Cr Rupees)||Stake (%)||Equity Value (tn rupee)||Enterprise Value (tn rupee)||EV/Sales (x)||EV/EBITDA (x)|
|Silver Lake Partners||5,656||1.2||4.92||5.15||7.5||22.9|
|Vista Equity Partners||11,367||2.3||4.90||5.13||7.5||22.8|
|Silver Lake Partners and co-investors||4,547||0.9||4.89||5.12||7.5||22.7|
|Abu Dhabi Investment Authority||5,684||1.2||4.90||5.13||7.5||22.8|
|Public Investment Fund||11,367||2.3||4.90||5.13||7.5||22.8|
- Reliance’s loan book has grown day by day due to the launch of other businesses, including the telecom business in a short time. The purpose of building Jio Platforms was to attract large investments by setting up separate loan-free entities for digital business and thereby shortening Reliance’s loan book. As a subsidiary, Reliance was in debt of Rs 1 lakh crore due to Reliance Jio. But fortunately, at the same time, an equal amount of cash gets in Reliance. What is the source of this cash? Earlier, Jio Platforms subscribed to Reliance Jio’s preferred shares. And, the cash received from it is transferred to the parent company Jio. Now the question is where did Jio Platforms get the money to subscribe to this share. This money was received from the parent company Reliance! Earlier last year, Reliance issued preferred shares in the same manner as Jio Platforms and Reliance Jio and subscribed to them. What turns out at the end of the day? Reliance has used their own cash for financing at Jio Platforms. Later on, Jio Platforms used that cash for financing in the telecom subsidiary, Reliance Jio. Ultimately, Jio returned this money to the parent company, Reliance. Thus, Reliance got back its cash along with the loan from its telecom subsidiary. As many deals have been made in the last 3 months, Jio Platforms will keep some of the proceeds from each investment, with the rest to repay the loan to Reliance.
- Concerns over data sovereignty among Indian companies are getting stronger due to the recent border conflict between the US-China trade war and India-China. Giant companies in various other sectors, including telecom and digital payments, have a huge amount of data. Sector giants are also vocal about enacting protectionist legislation to prevent companies in developed countries like China and the US from having free access to Indian data. And for these reasons, US tech giants like Google, Facebook, Amazon, Microsoft are facing various regulatory restrictions to operate in India.
It would not be wrong to think that the investment of Facebook and Google in Jio is a way to relax and regulate Indian companies’ access to Indian data, even if it means a little bit about regulatory restrictions on the activities of foreign companies in India. While not global, at least Reliance is teaching Indian technology-based companies how to do business. Later, the world’s tech companies may follow the path shown by Reliance.