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Mumbai / Bangalore: Billionaire Mukesh Ambani is a man on a mission: to dominate the Indian consumer Internet market, from online retail to digital payments.
He has just closed three deals in the same weeks to raise $ 8 billion combined, including from Facebook Inc.The richest man in Asia has yet to finish, as he rushes to transform the legacy of the oil and petrochemical empire his late father converted. in a technology powered by the strength of electronic commerce.
In Friday’s latest announcement from its Reliance Industries Ltd., Vista Equity Partners agreed to pay $ 1.5 billion for a 2.3% stake in Jio Platforms, the conglomerate’s digital unit. Earlier this week, Silver Lake Partners, based in Menlo Park, California, said it would invest $ 753 million in the business, immediately after Facebook’s decision in April to invest $ 5.7 billion for a 10% stake in Jio.
The avalanche of transactions shows that the magnate’s ambitions to turn Reliance Industries into an Indian tech titan are going into hyperdrive. With investments from the social media giant and the two private equity firms, Ambani, 63, is not only gaining the support of Silicon Valley for his plans, but is also raising funds to fulfill a promise he made to investors. in August: to eliminate net debt from your group.
“Mukesh Ambani’s transformation plans for Reliance Industries tell us that we can expect a significant hike in the coming years,” said Chakri Lokapriya, managing director of TCG Asset Management. “He clearly understands that a technology company has a much higher value than Reliance’s underlying commodity business.”
The deals also show the negotiating chops of the Mumbai-based company, when most of the world is on a blockade to help contain the spread of Covid-19. While travel brakes hampered progress in the talks, Ambani’s trusted lieutenants and Facebook CEO Mark Zuckerberg resorted to video conferences and phone calls to conclude the deal, people familiar with the matter said last month.
Jio Platforms’ turn as an investor magnet is based on the potential of India’s digital market, both business and consumer. All businesses rooted in ancient practices and technologies are ready for disruption, be it the kirana or family store, its traditional education system, or hospitals.
Impenetrable market
On top of that, India is the only major open internet marketplace where foreign tech giants like Amazon.com Inc., Walmart Inc and Google’s parent company Alphabet Inc. can fight for market share and dominance. Neighboring China, another large market, is impenetrable to foreign tech companies.
Investors are excited about the potential of Jio Platforms with their aspiration to invest not only in online retail, but also in content streaming, digital payments, education and healthcare. He has even skipped to video conferencing through his JioMeet app.
“Trust is the behemoth that can accomplish all of this,” said Sanchit Vir Gogia, founder and CEO of technology and digital consulting, Greyhound Research. “You can match your offline assets with your online properties for better monetization and multiple streams of income. That excites investors who see it as a hybrid opportunity. “
Cashless system
Facebook and India’s largest corporation serve around 400 million users in the country, and have made it clear that the first business is to establish a cashless system to anchor forays into Internet commerce and mobile services. That alliance inserts a powerful new competitor into an arena already contested by Google, Walmart, Amazon and the local team backed by SoftBank Group Corp. Paytm.
But none of them has the reach of WhatsApp from Facebook, the most popular communications platform in the country.
With its investment, Vista would become Jio Platforms’ largest investor after the parent and Facebook, Reliance said in a statement on Friday.
“We are excited to take advantage of the professional experience and multi-level support that Vista has been offering its investments worldwide for the benefit of Jio,” Ambani said in the statement. Reliance Industries shares rose 3.6% on Friday to limit the seventh week of earnings, the longest winning streak since 2016.
Similar agreement
After three rounds of stake sales, Jio Platforms, which combines the power of the company’s wireless platform with some apps and ecosystems, is now valued at around $ 65 billion. That is about half the market value of Reliance.
Last week, the Mumbai-based company said it received interest from other potential investors for a deal similar in size to Facebook’s.
Ambani’s pivot began in 2016, when he first launched into telecommunications. Reliance Jio Infocomm Ltd., its wireless service provider, is now India’s largest with almost 400 million subscribers. Late last year, he introduced JioMart, the online shopping portal meant to compete with people like Amazon in India. The site is still in pilot.
When Ambani rolled out the wireless network spending nearly $ 50 billion, his company also went into debt. He told shareholders in August that he reduced net debt to zero in March 2021 by selling stakes, from approximately $ 20 billion as of March 2019.
In progress
The group said last week that talks with Saudi Arabian Oil Co. to sell an estimated $ 15 billion stake in its oil and chemicals business were still ongoing. The guarantee came after the pandemic collapse of crude oil fueled investor skepticism about the negotiations.
In addition, the company also plans to raise around $ 7 billion by selling shares to existing investors.
The series of agreements, those to come and the issue of rights can help Ambani achieve that goal in advance. Reliance told investors last week that it was on track to hit the target ahead of the previously set timeline.
The agency “is also hampering the company’s net debt reduction targets in the event of a possible delay in selling its stake in the oil-to-chemicals business to Aramco, which may not be in a rush to reach an agreement when oil prices are low, prices are low, “said Mayur Patel, fund manager at IIFL Asset Management. – Bloomberg
Also read: Mukesh Ambani Raises More Funds, Now US Private Equity Firm Invests $ 1.5 Billion In Jio
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