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.
AdvertisementDuring 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.
“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 .
Here’s what the investors paid for shares in Jio and how they valued the company
|Company||Investment in Jio||Stake in Jio||Equity value|
|₹43,574 crore||9.99%||₹4.62 lakh crore|
|₹33,737 crore||7.73%||₹4.36 lakh crore|
|Saudi PIF||₹11,367 crore||2.32%||₹4.91 lakh crore|
|KKR||₹11,367 crore||2.32%||₹4.91 lakh crore|
|Vista||₹11,367 crore||2.32%||₹4.91 lakh crore|
|Silver Lake||₹10,202.55 crore||2.08%||₹4.90 lakh crore|
|Mubadala||₹ 9,093.60 crore||1.85%||₹4.91 lakh crore|
|General Atlantic||₹6,598.38 crore||1.34%||₹4.91 lakh crore|
|ADIA||₹5,683.50 crore||1.16%||₹4.91 lakh crore|
|TPG||₹4,546.80 crore||0.93%||₹4.91 lakh crore|
|L Catterton||₹1894.50 crore||0.39%||₹4.91 lakh crore|
|Intel||₹1,894.50 crore||0.39%||₹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.
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.
“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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