Facebook Inc announced a $5.7 billion (Rs 43,574 crore) investment in Reliance Industries Ltd’s telecom unit on Wednesday, making it the largest minority shareholder in Jio Platforms Limited. This investment will translate to a 9.99% equity stake in Jio Platforms on a fully diluted basis, Jio said in a statement.
Jio strategy head Anshuman Thakur said on a conference call with reporters that Facebook will get a seat on the board of Jio Platforms, along with that of an observer. However, WhatsApp and Jio will remain independent entities with their own business models and compete where necessary, Thakur added.
According to media reports, the deal comes at a time when WhatsApp, a Facebook-owned entity has secured approval to roll out its digital payment service in India, to compete with similar platforms like Google Pay and Paytm. The social media giant would focus on collaborating its messaging platform WhatsApp with Reliance’s e-commerce venture JioMart to enable small businesses to connect with consumers.
Reliance Industries, in a statement, said “The companies will work closely to ensure that consumers are able to access the nearest Kirana who can provide products and services to their homes by transacting seamlessly with JioMart using WhatsApp.”
The transaction is contingent upon regulatory and other customary approvals, Reliance said. Jio officials articulated, separately, that the only approval needed for the deal was from the Competition Commission of India.
A government official noted the deal could be closely scrutinized by the anti-trust watchdog given both companies have the private data of millions of Indians, which may give a consolidated undue advantage against rivals — such as Google, Amazon, or local startups.
Some experts apprehended that the tie-up may give rise to possible concerns around net neutrality, especially the possibility of preferential treatment by Jio to Facebook and WhatsApp. Jio, nonetheless, rejected both concerns.
The deal also comes at a time when some analysts are concerned that, with the collapse in oil prices, there is an increasing risk to Reliance Industries’ deal to sell a stake to Aramco for $75 billion. This deal was a key element of RIL’s envisaged endeavor to become a net debt-free company by March 2021.
According to Reliance Industries, this is the world’s largest investment for a minority stake by a technology company and the largest foreign direct investment (FDI) in the technology sector in India. The investment appraises Jio Platforms among the top five listed companies in India by market capitalization.
“In the very near future, JioMart, Jio’s digital new commerce platform, and WhatsApp, will empower nearly 3 crore small Indian Kirana shops to digitally transact with every customer in their neighborhood,” said Mukesh Ambani, chairman and MD of RIL. “This means all of you can order and get faster delivery of day-to-day items, from nearby local shops.”
He added that the emphasis of the tie-up will be to fabricate new ways for people and businesses to operate more effectively in the growing digital economy.
Analysts said the Jio deal would also facilitate Facebook to strengthen WhatsApp as a social commerce tool in India.