InvestNow News – 15th May – India Avenue – Why Facebook Loves India
A few weeks ago, Facebook paid US$5.7bn for a 9.9% stake in Reliance Industries, Jio Platforms (JPL) business. That was the largest amount paid for a minority shareholding in the tech space on a global basis. Additionally, on the back of this deal, Silver Lake Partners (a large US PE firm with US$42bn of Assets Under Management) specialising in the tech space stepped up and added another US$750m for 1.1% and this week Vista Equity Partners, another US Tech PE firm invested US$1.5bn for a 2.2% stake – validating and putting a 20% premium on Facebook’s valuation of JPL. There will be more who follow.
The majority owner of JPL is Reliance Industries, India’s largest company by market capitalisation (market cap US$123bn). It was founded in 1973 by Dhirubhai Ambani as a polyester yarn business. In the 1990’s the firm entered Petrochemicals, adding Retailing in 2006 and telecommunications in 2010. The company is now one of the top 100 companies in the world by market cap! On the ASX 300, it would be the largest company, exceeding CSL by 35%.
Why would Facebook pay so much for a minority stake in JPL, a majority owned subsidiary of Reliance? Jio Platforms (JPL), essentially a tech company, houses all digital initiatives and telecommunication assets of Reliance. The business is involved in mobile, broadband and enterprise as well as all digital assets and tech investments. In 2016, the company invested US$33bn to construct a nationwide 4G broadband service network and is likely to lead India towards the roll out and enablement of 5G.
The vision is to enable the digitisation of India’s 1.3bn population and digitally enable its businesses including merchants, microbusinesses and farmers. In less than four years, Jio now has a subscriber base of 388m people. Initially they added subscribers by de-stabilising the industry by offering free data and voice calls. Value absorbed Indians were obviously quick to add a Jio connected phone. Free data no longer, yet subscriber numbers continue to grow rapidly.