American private equity firm Silver Lake will invest USD 746.7 million (INR 5,655.75 crore) in Jio Platforms, the digital arm of Reliance Industries, India’s largest conglomerate by market capitalization, the Mumbai-based company said Monday in a regulatory filing.
This comes barely 10 days after social networking giant Facebook bought a 9.9% stake for USD 5.7 billion in Jio Platforms. The milestone deal facilitates Reliance to latch on to Facebook’s chat platform WhatsApp to rope in small Indian retailers to offer e-commerce services to millions of people in the country.
Jio Platforms is an umbrella entity under which Reliance has created an eco-system comprising of its telecom network, devices, apps, content, platforms, and services. The four-year-old Reliance Jio, the telecom arm of the oil-to-retail conglomerate, that disrupted the world’s second-largest telecommunications market with its dirt-cheap data plans to emerge as the market leader with 388 million subscribers, is a wholly-owned subsidiary of Jio Platforms.
“This investment values Jio Platforms at an equity value of USD 64.6 billion (INR 4.90 lakh crore) and an enterprise value of USD 67.9 billion (INR 5.15 lakh crore) and represents a 12.5% premium to the equity valuation of the Facebook investment announced on April 22, 2020,” Reliance said in the statement. As per KrASIA’s back of the envelope calculations, the deal gives Silver Lake a 1.15% equity stake in Jio Platforms.
The Silicon-Valley headquartered PE firm, with USD 40 billion in assets under management, has backed global companies like Ant Financial, Alphabet’s (formerly Google) life sciences research firm Verily and autonomous driving technology development company Waymo, Dell Technologies, Twitter, and Airbnb, among others.
Reliance said the Silver Lake’s investment at the time when COVID-19 pandemic has disrupted the world, has “a special significance.” As Jio Platforms gears up to play a crucial role in the post-COVID-19 world, it said, “comprehensive digitization will be a vital component of the revitalization of the Indian economy.”
“I am delighted to welcome Silver Lake as a valued partner in continuing to grow and transform the Indian digital ecosystem for the benefit of all Indians,” said Mukesh Ambani, chairman and managing director, Reliance Industries Ltd. “We are excited to leverage insights from their global technology relationships for the Indian digital society’s transformation.”
As Ambani, Asia’s richest person aims to eliminate Reliance’s USD 21.4 billion net debt by the end of this fiscal year, the company has been going all out, selling stakes in Jio Platforms and raising investments from American giants. After Facebook, bringing Silver Lake on board, has brought Ambani one step closer to his goal. According to a recent Bloomberg Quint report, Reliance has been looking to raise an additional USD 6 billion from the sale of shares in Jio Platforms after the Facebook deal.
“They (Jio Platforms) have brought extraordinary engineering capabilities to bear on bringing the power of low-cost digital services to a mass consumer and small businesses population,” said Egon Durban, Silver Lake Co-CEO and managing partner, in a statement. “The market potential they are addressing is enormous, and we are honored and pleased to have been invited to partner with Mukesh Ambani and the team at Reliance and Jio to help further the Jio mission.”
Last Thursday, Reliance reported a 39% fall in March quarter profit, the steepest drop since December 2008, as the oil prices tumbled and fuel demand declined amid COVID-19 pandemic that has forced people to remain indoors. However, Reliance Jio Infocomm Ltd (Jio) posted a net profit of USD 307.7 million (INR 2331 crore) for the three months ended March 31, up 177.5% over last year.