This is one of the largest deals in the technology space in India in 2020.
What is the deal?
Facebook Inc will invest close to Rs. 43,574 crore in Jio platforms for a 9.99% stake. The Jio Platforms is the parent of Reliance Jio which also covers digital apps like Jio Mart, Jio Saavn and Jio Cinema.
This deal values Reliance Jio as a Rs. 4.62 lac crore entity pre money (i.e. before this investment)
BIG QUESTION: WHY?
The broad idea as a statement from RIL (Reliance Industries Limited), is providing access to the consumers to the nearest kirana stores by helping them transact with Jio Mart through Whatsapp (owned by Facebook).
They are trying to leverage the e-commerce platform of the Jio Platforms and the messaging arm of Facebook.
Now, the question arises why Facebook couldn’t enter India without this investment?
If our reader’s memory serves them right, then they’ll remember that Facebook tried to enter India through internet.org, providing free internet access to the most disadvantageous section of the society with some pre-installed apps. This was not successful as this went against the principal of Net Neutrality.
Net Neutrality: “The principle that Internet service providers should enable access to all content and applications regardless of the source, and without favouring or blocking particular products or websites”
So, the telecom department of India blocked the ambitious idea of Mark Zuckerberg.
How does Reliance benefit from this Investment?
Reliance Industries is on the (ambition) track of being a net debt free company. And this investment will largely be used to achieve that target while some odd Rs.15000 cr will be retained by Rel Jio.
What can be the risks that may arise?
The biggest risk that seems is the regulatory hurdles of the Competition Commission of India.
Moreover, ideologies might also differ on how to treat and handle the data.
The views also might differ on how to provide access to social media data to the law enforcement agencies due to the recent Data Bill ( Personal Data protection Bill). Jio in one of the statement has urged to TRAI (the Telecom Regulatory Authority of India) that data should be provided to the the law enforcement whereas Whatsapp has been fighting against it.
So, lets see if this deal will succeed, until then see you!
