$8 billion stake deal in Indian Tech company gives 'US Tech Giants' sleepless night

$8 billion stake deal in Indian Tech company gives 'US Tech Giants' sleepless night
  • Facebook announced buying about 10% for $5.7 billion last month, followed by a $753 million investment by Silver Lake Partners a few days later.
  • Vista Equity Partners will buy a 2.3% stake in Reliance Industries Ltd.’s Jio Platforms for $1.5 billion, making the private-equity firm the largest investor in the digital arm after the parent and Facebook Inc.
  • Ambani is set to roll out a new retail venture, which could pose a challenge to established e-commerce firms such as Amazon, Netflix and Walmart’s Flipkart.

A cold and silent war plays out in the Stock market, Deals are made, Alliances are formed and New territories are won.

India’s Reliance Industries Ltd on Friday announced a $1.5 billion stake sale in digital unit Jio Platforms.

The proceeds made by the telecoms-to-energy group along sides previous deals made over two weeks is projected to be worth over $8 billion.

Private equity firm Vista Equity Partners is buying a 2.3% stake in Jio Platforms, the unit that houses Reliance’s telecoms venture Jio Infocomm, for $1.5 billion, Mumbai-headquartered Reliance reports in a press statement.

The investment also gives Jio Platforms an equity value of 4.91 trillion rupees and an enterprise value of 5.16 trillion rupees, said Reliance.

The deal comes after Reliance cut a $5.7 billion deal with Facebook  for a 9.99% stake in Jio Platforms on April 22, and just days after it secured a $750 million investment from private equity firm Silver Lake

Reliance last month reported a 39% decline in March quarter profit, hit by a sharp fall in oil prices and lower fuel demand.

The investment positions the Indian company controlled by billionaire tycoon Mukesh Ambani, as a leader in the telecom, tech and energy industry.

Ambani is set to roll out a new retail venture, which combined with Jio and interests in education, music, and films, could pose a challenge to established e-commerce firms such as Amazon and Walmart’s Flipkart.

Ambani has pitched Jio as a trailblazer tech company by offering cheap mobile data plans that helped hundreds of millions of Indians use the internet for the first time.

 

How will this deal position Reliance in the Global Tech Market competing with the likes of Amazon?

The impact of this deal sets up Reliance as a Trailblazer in the Tech industry and enables the company to diversify into new retail ventures.

The investments by Facebook, and private equity firms such as Vista and Silver Lake, which primarily fund tech platforms and not telecoms carriers, will further cement Jio Platforms’ position as a consumer-tech company, brokerage Axis Capital said in a note to clients.

“We are excited to leverage the professional expertise and multi-level support that Vista has been offering to its investments globally for the benefit of Jio,” Reliance Industries Chairman Mukesh Ambani said in the statement.

The Indian billionaire, Asia’s richest person, has been announcing a string of fund-raising plans as part of a proposal to slash debt at his Mumbai-based conglomerate and also to bolster investor confidence following the pandemic-led crash in crude oil prices. Last month, Reliance Industries said that the group’s net debt would be slashed to zero ahead of its previous target of early 2021.

With plans to sell $7 billion in new shares, Reliance meet its target of eliminating $21.4 billion of net debt by the end of the year. Shares in Reliance rose 4.4% in a broader Mumbai market which was trading 1.6% higher at 0514 GMT.