Analyst Corner: Facebook’s investment to boost RIL’s digi initiatives

By: |
April 23, 2020 2:01 AM

Facebook's investment into this entity will further RIL's digital initiatives. The announcement includes commencement of a partnership among JioMart (platform of RIL's new commerce initiative), Reliance Retail and WhatsApp.

RIL had restructured its digital business into one consolidated wholly-owned subsidiary.

Facebook’s investment values Jio Platforms at $65.95 billion. The social networking major announced an investment of Rs 43,574 crore for a 9.99% minority stake in Jio Platforms and valued Jio Platforms at an EV of Rs 4,62,000 crore (or $65.95 billion at $/Rs : 70) on a pre-money basis (a tad lower than our EV for Jio at $69 billion).

The deal follows the restructuring announced in October 2019 when Reliance Industries (RIL) transferred Rs 1,080 billion of debt from Jio to standalone entity, leaving liabilities of ~Rs 64,000 crore (spectrum liabilities and capex creditors) at Jio.

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 (AI, Big Data, IoT, etc) and investments (like Den, Hathway, etc).

Facebook’s investment into this entity will further RIL’s digital initiatives. The announcement includes commencement of a partnership among JioMart (platform of RIL’s new commerce initiative), Reliance Retail and WhatsApp. Currently, new commerce is under the 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.

As of December 31, 2019, net debt for the group stands at Rs 1,531 billion and with Facebook’s investment, this should put RIL on course to be net debt free by March 2021. The subscriber base of Jio has increased to 388 million now, implying net additions of 18 million subscribers in Q4FY20. The new additions have been impacted due to reduced MNP (mobile number portability) activity during the nationwide lockdown.

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