On Wednesday, US tech giant Facebook announced that it would invest $5.7 billion (Rs 43,547 crores) in RIL's wholly-owned subsidiary Jio Platforms to expand its presence in India. With this investment, Facebook will own 9.9 per cent stake in Jio Platforms. This would be Facebook's biggest minority shareholding ever.
After the announcement, in early morning trade, shares of Reliance Industries (RIL) gained 7 per cent at Rs 1,326 on the BSE and with today’s gain, the stock of RIL has rallied 14 per cent from its Tuesday’s low of Rs 1,164.
RIL said this is the largest investment for a minority stake by a technology company anywhere in the world and the largest FDI in the technology sector in India. The investment values Jio Platforms amongst the top 5 listed companies in India by market capitalization, within just three and a half years of launch of commercial services, it said in a statement.
Facebook said, "This investment underscores our commitment to India, and our excitement for the dramatic transformation that Jio has spurred in the country. In less than four years, Jio has brought more than 388 million people online, fueling the creation of innovative new enterprises and connecting people in new ways. We are committed to connecting more people in India together with Jio."
For Facebook, India has in recent years emerged as a critical market. The company has more users in India than any other country. Its WhatsApp chat service, which has attracted 340 million users and is about to launch a key payments service will take on incumbents Paytm, Google Pay, PhonePe and Amazon Pay.
Not lagging, Jio recently announced that it had the largest subscriber base with around 400 million users. “The bigger picture is that with everything going on in China, which in any case, is closed to Facebook — and the growing reluctance to engage with businesses there, India would then be the largest “user base in the world that has not been fully harvested”, said one technology analyst.
Why the deal?
The primary motivation for Facebook seems to be JioMart. Keeping the huge user base in mind, Facebook wants to bring small Jio’s small business platform JioMart -- to its messaging app-WhatsApp. This would help users to connect with small businesses over WhatsApp. “Our goal with this investment is to enable new opportunities for businesses of all sizes, but especially for small businesses across India Our focus will be India’s 60 million micro, small and medium businesses, 120 million farmers, 30 million small merchants and millions of small and medium enterprises in the informal sector, in addition to empowering people seeking various digital services,” notes a statement by Reliance.
Why Facebook, Reliance Jio deal is a wake-up call for Amazon, Flipkart?
The partnership is expected to help Mukesh Ambani-led Reliance’s e-commerce venture JioMart to take on players such as Amazon and Flipkart in the Indian online commerce market, backed by Facebook. According to industry insiders and analysts, the market opportunities for online commerce in the country are expected to touch $200 billion by 2028 from $30 billion in 2018.
JioMart is expected to aggressively chase the grocery space, where they can reach a large number of households and work in a way where customers end up buying a lot of services from Reliance itself, related to areas such as mobile connection, television, music and education. The bigger worry for Amazon and Flipkart now is to re-evaluate their business model or logistics as they are not able to fulfil the grocery demand. There is a lot of demand but companies are not ready to deliver.
“Facebook wants to use WhatsApp for e-commerce opportunities with small businesses. Amazon, Flipkart can’t compete with Jio-Facebook because they don’t have an edge on data. While in the short term, there may not be much market impact as due to #Covid19 nothing significant shall happen in the next 3-6 months, however in the long term the alliance will not only counter competitors like Amazon and Flipkart, but will rupture the entire e-commerce ecosystem in the country.
Time will tell if dialling Jio will lead Facebook to break new ground.
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