Facebook Investment To Accelerate Reliance Jio’s Digital Monetisation Drive, Say Analysts

Deal to put Reliance Industries on course to turn net debt-free by March 2021

The logo of Reliance Jio, the mobile network of Reliance Industries Ltd., is displayed at a store in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)
The logo of Reliance Jio, the mobile network of Reliance Industries Ltd., is displayed at a store in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Facebook's move to pick up about 10 percent stake in Jio Platforms will accelerate Jio's digital monetisation drive and put Reliance Industries Ltd. on course to turn net debt-free by March 2021, analysts said.

"RIL had restructured its digital business into one consolidated wholly-owned subsidiary - Jio Platforms - which would host all the digital initiatives of the firm, including Jio digital services (mobile, broadband), apps, tech capabilities (artificial intelligence, big data, internet of things) and investments (like Den Networks, Hathway Cable)," Credit Suisse said in a note.

It said that Facebook's investment into this entity will further Reliance Industries' digital initiatives and will help in deleveraging. “The deal will aid in achieving net debt-free (target) by March 2021. As of December 31, 2019, net debt for the group stands at Rs 1,531 billion (Rs 1.53 lakh crore) and with Facebook's investment, this should put RIL on course to be net debt free by Mar-2021,” it said.

The announcement includes commencement of a partnership among JioMart (platform of RIL's new commerce initiative), Reliance Retail and WhatsApp, it noted.

"Currently, new commerce is under purview of Reliance Retail and outside of Jio Platforms. The partnership will entail leveraging the messenger platform to facilitate new commerce transactions between a consumer and a kirana store," Credit Suisse said.

In similar vein, Bernstein said the partnership is strategic for both companies. "The investment in Jio is one of the biggest investments Facebook can make. The transaction fits with their recent push to build themselves and experiment more and provides a closed network of 388 million users to test on, proof point around the already announced partnership to build and test a WeChat like app," it said.

"Facebook has already launched WhatsApp as customer service/social commerce tool in India allowing brands and retails to talk directly to customers/prospects, this can strengthen that offering both for 60 million small merchants on JioMart but also for Reliance Jio itself," Bernstein added.

Facebook announced an investment of $5.7 billion (Rs 43,574 crore) to buy a 10 percent stake in the firm that houses billionaire Mukesh Ambani's telecom arm Jio, as the social media giant looks to expand presence in its largest market in terms of subscriber base.

Reliance in a separate statement said the investment by Facebook values Jio Platforms at Rs 4.62 lakh crore pre-money enterprise value. "Facebook's investment will translate into a 9.99 per cent equity stake in Jio Platforms on a fully diluted basis," it said.

The Facebook deal is part of value unlocking by RIL to cut debt. RIL has been seeking strategic partnerships across its businesses while targeting to deleverage its balance sheet.