Mukesh Ambani gave Google and Facebook a discount on Reliance Jio stake ⁠— here’s why

Mukesh Ambani gave Google and Facebook a discount on Reliance Jio stake ⁠— here’s why
BI India/Sundar Pichai(Twitter), IANS
  • Google’s $4.5 billion cheque and Facebook’s $5.7 billion investment were a cheaper deal than the rest.
  • Both the deals had a different equity valuation for Jio than the other financial investors who also paid a 12.5% premium.
  • The global tech giants are strategic investors in Jio, who will also bring on board their own technology.
During the Reliance Annual General Meeting, Chairman Mukesh Ambani announced that Google has invested ₹33,737 crore in Jio Platforms for a 7.7% stake. Google became the second largest investor in Jio after Facebook which has a 9.9% stake in the company.

Interestingly, Google’s $4.5 billion cheque and Facebook’s $5.7 billion investment were a cheaper deal than the rest. Both the deals had a different equity valuation for Jio than the other financial investors who also paid a 12.5% premium.
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“Facebook and Google have come at a lesser valuation as there’s a difference between the financial investors and the strategic tech investors. It is understood that the financial investors will pay a premium as the tech investors will also bring their own technology in the deal,” said Deven Choksey, Managing Director of KRChoksey Investment Managers .

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Here’s what the investors paid for shares in Jio and how they valued the company

CompanyInvestment in JioStake in JioEquity value
Facebook₹43,574 crore9.99%₹4.62 lakh crore
Google₹33,737 crore 7.73%₹4.36 lakh crore
Saudi PIF ₹11,367 crore2.32%₹4.91 lakh crore
KKR₹11,367 crore2.32%₹4.91 lakh crore
Vista₹11,367 crore2.32%₹4.91 lakh crore
Silver Lake₹10,202.55 crore2.08%₹4.90 lakh crore
Mubadala₹ 9,093.60 crore1.85%₹4.91 lakh crore
General Atlantic₹6,598.38 crore1.34%₹4.91 lakh crore
ADIA₹5,683.50 crore 1.16%₹4.91 lakh crore
TPG₹4,546.80 crore0.93%₹4.91 lakh crore
L Catterton₹1894.50 crore0.39%₹4.91 lakh crore
Intel₹1,894.50 crore0.39%₹4.91 lakh crore
Qualcomm Ventures₹730 crore 0.15%₹4.91 lakh crore


Google and Facebook bring more to the plate than just money

Both the global tech giants are strategic investors in Jio, who will also bring on board their own technology.
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The investment from Google comes from CEO Sundar Pichai’s recent announcement that it will invest a whopping $10 billion in India through the Google for India Digitization Fund.

Over 40% of that went to the company owned by the country’s richest man. “Reliance Industries, and Jio Platforms in particular, deserve a good deal of credit for India’s digital transformation. The pace and scale of digital transformation in India is hugely inspiring for us and reinforces our view that building products for India first helps us build better products for users everywhere,” said Pichai in a statement.

Sanchit Vir Gogia, Chief Analyst at Greyhound research believes that the decision by Google to invest in Jio is a game changer for both companies on many layers spanning devices, search, apps and commerce. Jio and Google have also entered into a commercial agreement where they are set to develop an entry level affordable smartphone for Indians.
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“Google’s leadership in community apps (read search, voice, and collaboration apps) alongside Jio’s prowess in connectivity and commerce means a much greater ability to win and own market share across consumer types and network of retailers. Both parties bring suitable strengths on the table and are well positioned to deliver on the promise of growth,” Gogia told Business Insider.

With Facebook, Jio is betting on the partnership with Whatsapp’s nearly 400 million users in India to build its online retail venture – JioMart. “By bringing together JioMart, which is Jio's small business initiative to connect millions of shops across India with WhatsApp, we think that we're going to be able to create a much better shopping and commerce experience. And there's a lot more that we can do here, and I'm looking forward to making progress with the team at Jio,” Facebook CEO Mark Zuckerberg had said during an earnings call in April.

The Facebook-Jio partnership will also become the testing ground for innovation for WhatsApp. Zuckerberg confirmed that all the products and technology that they're building to enable the Jio partnership are going to be things that they want to do around the world.
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SEE ALSO:
Jio set-top box maker Dixon Tech shares have doubled in less than 4 months⁠— and there may be more

Mukesh Ambani is not done – Jio Fiber to get over $1 billion as Abu Dhabi and Saudi sovereign funds are set to invest in Reliance InvIT

Google picks up a 7.7% stake for ₹33,737 crore in Reliance Jio – the two will now build affordable smartphones for India


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