Facebook invests $5.7 billion in Jio By CIOReviewIndia Team

Facebook invests $5.7 billion in Jio

CIOReviewIndia Team | Wednesday, 22 April 2020, 13:06 IST

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Facebook invests $5.7 billion in Jio

Facebook to spend 5.7 billion dollars for 10 per cent of Reliance Industries’ digital business, as the American online social media and social networking service firm intends to offer digital payment services to small grocers across India by leveraging its most sought-after WhatsApp messenger app.

This offer will help Reliance cut debt that has been accumulated in its push to secure top spot for its Jio Infocomm telco, and help foster its new online grocery marketplace JioMart.

The country’s online grocery market is renumerative but at the same time it is competitive, with Amazon.com’s Pantry hustling for market share with Walmart’s Flipkart and BigBasket, supported by China’s Alibaba.

However, a great deal of untapped value lies in the country’s small grocers, also popularly known as kirana stores. These are the lifeblood of India’s 375-billion-dollar grocery industry, as per the data from the Retailers Association of India.

“In the near future Jio Mart … and WhatsApp will empower nearly 30 million small Indian kirana shops to digitally transact with every customer in their neighborhood,” Mukesh Ambani, Reliance’s billionaire CEO said in a video statement.

“WhatsApp has 400 million users in India, its biggest market. It has been trying to tap payments and both want to increase grassroots adoption,” said Tarun Pathak, associate director at Hong Kong based Counterpoint Research.

“The collaboration of JioMart and WhatsApp services will help reach grassroots users in India who shop from small stores,” he added.

Reliance’s Jio has roughly 370 million subscribers, which has become India’s largest telco within about three years of its launch. Furthermore, with the online Social media giant – Facebook’s investment, Reliance will become the largest minority shareholders in Jio Platforms.

Reducing Debt

“With crude prices where they are, the main oil and gas business will be under pressure. The Facebook deal allows them to cut some debt, and also establish a valuation for the Jio business,” said RusmikOza, Executive Vice President at Kotak Securities.

Reliance is also prepared to sell stakes in its refining business to Saudi Aramco, and its telecom tower assets to Brookfield.  Moreover, in March, Facebook was in talks for a stake in Jio, but the talks came to a stand still due to the pandemic, which was reported by Financial Times.

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