It is the biggest FDI headline. $8.82 billion in 26 days and all of it in one company.
Jio Platforms Ltd (JPL), the digital subsidiary company of Reliance Industries Ltd (RIL) has cut four mega equity deals with global tech and top investors. On April 22, came the first deal when Facebook announced its decision to invest Rs 43,574 cr in JPL for a 9.99 per cent stake. The second was on May 4, with Silver Lake deciding to invest Rs 5,656 cr for a 1.15 per cent stake. The third was on May 8. Vista Equity Partners said that it would invest Rs 11,367 cr for a 2.32 per cent equity stake. On May 17, a fourth deal was announced with General Atlantic, a leading global growth equity firm deciding to invest Rs 6,598 cr for 1.34 per cent stake in JPL. Thus, JPL sold 14.80 per cent for Rs 67,195 cr (about $8.82 billion). Coming as it does in the time of COVID-19 when the business sentiment is down and out, this admittedly will be remembered as a huge achievement for many years to come.
The Facebook deal valued JPL at Rs 4.62 lakh-crore. Barely 12 days later, the Silver Lake deal revealed a new equity valuation of Rs 4.92 lakh crore for JPL. Silver Lake paid a 12.75 per cent premium over what FB had paid. The Vista equity deal also valued JPL at an equity value of Rs 4.92 lakh crore. The latest General Atlantic deal values JPL at an equity value of Rs 4.92 lakh crore.
JPL may divest another 5.20 per cent. Reliance Jio Infocomm Ltd (RJIL), the telco that has over 388 million subscribers, is a wholly-owned subsidiary of JPL. With these four investments of about Rs 67,195 crore in JPL, Rs 25,125 crore investment by Brookfield in Reliance’s mobile tower Trust (Tower Infrastructure Trust) and Rs 53,125 crore of rights issue that RIL announced on April 30, the group is heading to cut debt on its books as it aims to become a zero-net-debt company by March 2021. RIL’s net debt at the end of December 2019 stood at Rs 1.53 lakh crore while the cash in hand stood at Rs 1.3 lakh crore.
JPL’s valuation is likely to increase further with any new investments. The increasing interest from foreign investors will help Jio to gear up for a prospective IPO.
On the ground, the FB-JPL deal is enormous advantage to millions of kirana stores and will clean up the e-com space. Till now this business has been beset with repetitive violations of deep discounting and unfair trade practices by deep-pocketed incumbents. In contrast, the FB-JPL model, is based on the co-existence and co-development of traditional and digital, and therefore a win-win proposition. The other three deals by top global investors reposes massive sentiment in favour of India’s tech business.
