THE GLOBAL GIANTS' BET ON INDIA AND JIO PLATFORMS

©Dhiraj Singh (Bloomberg)

Saudi Arabia’s Public Investment Fund has invested USD 1.5 billion into Mukesh Ambani’s Jio Platforms, becoming the latest international investor to invest into the fast-growing Indian digital services business during the coronavirus pandemic.

Mr Ambani, Asia’s richest man and chairman of India’s oil-to-retail conglomerate Reliance Industries, has now raised more than USD 15 billion and sold nearly a quarter of Jio. Since launching in 2016, Jio has attracted nearly 400 million telecom subscribers and branched into e-commerce and other digital services as it seeks to become India’s first internet giant. 

The deal follows investments in Jio by US private equity group TPG Capital and consumer fund L Catterton for USD 600 million and USD 250 million, respectively. Before, Facebook had bought 10% of Jio for USD 5.7 billion in April this year. Other investors ranging from private equity firms such as Silver Lake and KKR to other sovereign Gulf entities such as the Abu Dhabi Investment Authority and Mubadala. The flood of international money comes as coronavirus disrupts business models and economies around the world.

The PIF is chaired by Crown Prince Mohammed bin Salman, the heir to the Saudi throne, and it is his chosen vehicle for leading the diversification of the kingdom's economy beyond oil and modernising the conservative country.  Not only is the PIF charged with overseeing domestic mega projects and developing new industries in the Kingdom, it is also increasing its overseas exposure: from investments into companies such as ride-hailing app Uber to cruise operator Carnival. 

Low demand for energy products has increased pressure on Mr Ambani to show he can cut the tens of billions of dollars of debt he took on in diversifying Reliance. He has vowed to cut the group’s net debt to zero by March 2021, and Reliance this month completed a USD 7 billion rights issue. Furthermore, the coronavirus pandemic has exacerbated geopolitical tensions between the US and India on the one side, and China on the other. This has helped boost the appeal of Jio and India’s digital economy for international investors looking for an alternative to China. “The potential of the Indian digital economy is very exciting and Jio Platforms provides us with an excellent opportunity to gain access to that growth,” Mr Rumayyan said.

For some comparison, India’s startup ecosystem raised $14.5 billion last year — in what was its best year. The recent announcement illustrates the opportunities foreign investors see in Jio Platforms. Analysts at Bernstein said this week they expect Jio Platforms to reach 500 million customers by 2023, and control half of the market by 2025. Jio Platforms competes with Bharti Airtel and Vodafone Idea, a joint venture between British giant Vodafone and Indian tycoon Kumar Mangalam Birla’s Aditya Birla Group.

In a statement, Yasir Al-Rumayyan, governor of PIF, said, “We are delighted to be investing in an innovative business which is at the forefront of the transformation of the technology sector in India. We believe that the potential of the Indian digital economy is very exciting and that Jio Platforms provides us with an excellent opportunity to gain access to that growth. This investment will also enable us to generate significant long-term commercial returns for the benefit of Saudi Arabia’s economy and our country’s citizens, in line with our mandate to safeguard and grow the national wealth of the Kingdom.”

In Facebook’s case, the investment in Jio is one of the biggest investments Facebook so far and could help the Silicon Valley firm experiment with something akin to WeChat, the popular messaging app in China that is used for everything from booking doctor's appointments to making digital payments. "The transaction fits with their recent push to build themselves and experiment more and provides a closed network of 388 million users to build and test a WeChat like app," Bernstein analysts said in a note.

Jio Platforms also owns a bevy of digital apps and services, including music streaming service JioSaavn (which it says it will take public), on-demand live television service JioTV and payments app JioMoney, as well as smartphones and broadband business. These services are available to Jio subscribers at no additional charge.