Reliance Jio – Facebook : A Massive Deal

Facebook Inc. and its CEO Mark Zuckerberg bought around 9.9% of Reliance’s digital assets for $5.7 billion dollars (nearly Rs 43,574 crore) which has been the biggest purchase since acquiring WhatsApp 6yrs ago. This huge deal is broadly divided into two parts. Firstly, Facebook will invest Rs 43,574 crore for a 10 per cent stake, out of which Rs 15,000 crore is retained in the company and rest, about Rs 28,000 crore will be used to redeem OCPS (optionally convertible preference shares) of RIL. A separate partnership has also been signed with Facebook-owned WhatsApp, Reliance Retail and Jio Platforms (a subsidiary of RIL) to grow RIL’s new commerce business (called JioMart) using WhatsApp. One of the major aim of this investment was to create new opportunities for small and medium businesses and provide digital ecosystems that will empower the lives of all 1.3 billion Indians.

• WHAT ARE THE MUTUAL ADVANTAGES OF THIS DEAL :

1. Ambani first talked about the new e-commerce business where he said that this vertical would redefine the retailing in India and become one of the biggest new growth engines for Reliance in the years to come.It would enable RIL to compete with huge business gaints like Amazon and Flipkart with its new e-commerce platform (JioMart).

2. The partnership with India’s biggest wireless carrier by subscribers gives Facebook a push in its top global market. For a company that has faced regulatory scrutiny in India over fake news and privacy concerns, this tie-up may also help cement its position.

3. It also ran into opposition bin 2019 in Indian payments market while launching payment feature inside Whatsapp over data security and storage concerns.Facebook has been trying hard to establish a wider presence in India for a long time. From market size and the human traffic India and China are crucial markets for social media companies. Since Chinese market is closed for US players, gaining a deeper foothold in India becomes much more important

4. Jio Infocomm now has almost 400 million subscribers, about the same number of WhatsApp users as there is in the country.
RIL now could leverage WhatsApp’s user-base and increase its platform’s reach to digitise the kirana stores and their supply chain to potentially go far beyond other players like Paytm.

5. Fascinatingly Zuckerberg also spoke about how the coronavirus pandemic has resulted in many businesses shutting down their physical storefronts and this brings about the need to build digital storefronts. And this is exactly what the Reliance acquired startup Nowfloats promises to do.

• RIL invested $20 million for a majority stake in Nowfloat. Nowfloat is a startup that helps businesses and individuals, who don’t have any web developing skills, build their online presence.
• this will help RIL create a strong rival to online e-commerce giants like Amazon and further strengthen its leadership position in retail in India

6. JioMart – Jio’s digital new e-commerce platform, and WhatsApp – will empower nearly 3 crore small Indian kirana shops to digitally transact with every customer in their neighbourhood. This means all of us can order and get faster delivery of day-to-day commodities, from local shops. At the same time small Kiranas can grow their businesses and create new employment opportunities using digital technologies

• THIS DEAL ON THE OTHER HAND HAS A FEW STRONG POINTS AS TO WHY THE PEOPLE FEEL IS ‘UNMATCHED’ :

1. Firstly it is enigmatic how the working of Jio will change after the deal on what they are already doing.

2. Both the parties have cautiously signed up for the deal. JioMart has created a WhatsApp number rather than integration.

3. Ambani had announced that the multi-lakh crore of the triad : Reliance Jio, Reliance retail and Facebook WhatsApp aimed at tapping potential 6crore MSMEs’. Don’t anticipate the Ambanis to give away the future of their business to Facebook.

4. Joint AI and big data analytics just for 9.9% stake? Honestly facebook wouldn’t pour in their million dollar secret element into it.

With the pandemic battering assets and sudden fall in oil prices,this massive deal has given the Asia’s richest man his much needed win to prevent investors withdrawal from Reliance Industries. Even the Debt investors have reacted positively so far regarding the company’s ability to rein in its liabilities. For Mukesh Ambani the deal paring WhatsApp payment with his e-commerce startup was very timely, given the collapse in oil prices and the delay in Aramco deal, he needed this good news in the current environment. This investment values Jio Platforms amongst the top 5 listed companies in India by market capitalisation. The share of Reliance industry has now raised to $ 11 billion.The teaming up has given signs of tough competition to market giants like the Alibaba-backed Big Basket, Amazon’s Pantry and Walmart-owned Flipkart. Some people have reacted to this as a denial of swadeshi commitment of the BJP government. But Swadeshi has always meant self-reliance, and not self-sufficiency. Foreign trade and investment are permitted as a part of Swadeshi policy of the government if export earnings and commercial borrowing cover the import bill and also add to the foreign reserves. It’s clear that this deal isn’t just big, it’s serious and has the potential to have major affects on entire e-commerce and telecom industry