Jio’s Fundraising Success Amidst Global Recession
As the COVID-19 pandemic continues its incessant global spread, economies are collapsing, businesses are going bankrupt, and stock markets are crashing to create an unprecedented worldwide recession. However, amidst the chaos, one company has never been better.
Jio Platforms, India’s largest telecoms service provider, has attracted over $15 billion in investment from leading private equity powerhouses, tech giants, and sovereign wealth funds since April 2020. The trend started with Facebook, which announced a hefty $5.7 billion investment in Jio on April 21, 2020. Two weeks later, private equity firm Silver Lake Partners followed suit with $750 million. Since May, investments were made by Vista Equity Partners ($1.5 billion), General Atlantic ($873 million), KKR ($1.5 billion), Mubadala Investment Company ($1.2 billion), Abu Dhabi Investment Authority ($752 million), Silver Lake (second tranche of $600 million), TPG Capital ($600 million), L Catterton ($252 million), PIF ($1.5 billion), and finally Intel ($253 million). Jio’s parent company, Reliance Industries Ltd., has exchanged a 25.09% stake in Jio to these investors in return. For quantification purposes, Intel’s 0.39% stake values Jio's equity at $65 billion.
Two questions come to the forefront of this extraordinary event. First, why are companies suddenly so interested in investing in Jio? And second, why is parent company Reliance intentionally reducing its own stake in Jio?
Beginning with the financial perspective, Jio’s parent company Reliance is the largest company in India, boasting an impressive revenue of $88 billion. Jio has also become the market leader in the Indian telecommunications industry thanks to a profitable history. Furthermore, Jio is currently unlisted on the stock market but has plans to go public in the near future as a separate entity from Reliance (RIL). Thus, it is strategic for firms to profit off Jio’s success in the present moment, pandemic or no pandemic.
From an innovation perspective, these companies are backing founder Mukesh Ambani’s mandate to transform Reliance into a digital services giant and decrease dependence on revenue from oil refining and petrochemical activities. They are “impressed with Jio’s grasp on broadband connectivity, smart devices, big data analytics, artificial intelligence, IoT, cloud computing, AR, mixed reality and blockchain”, and want to help maximize the potential of Jio’s future societal impact. Wendell Brooks, Intel Capital president, expressed his “[excitement] to help fuel digital transformation in India, where Intel maintains an important presence”. These firms see an alignment of values with Jio’s mission of connecting everyone and everything, everywhere. This is especially relevant during these times, as COVID-19 has accelerated the need for technological innovation in what is becoming a truly digital society. People are craving human connection amidst strict physical distancing regulations and extended lockdown periods, and the solution is a digital connection.
There also appears to be a political motive behind these generous investments. At a meeting with US President Donald Trump earlier this year, Mukesh Ambani stated that Jio was the only network in the world that refuses to adopt any Chinese components while setting up a 5G network. Jio plans to get into 5G implementation without any third-party help by developing its own indigenous technology. Since the announcement, Jio’s rivals Airtel and Vodafone Idea have tied up with Chinese firms Huawei and ZTE to source 5G equipment.
Reliance has a history of strong American partnerships. In 2018, they acquired American firm Radisys for $67 million and merged with Rancore Technologies, a move that would help Reliance in telecom equipment development. This equipment will be either designed in India and built abroad or designed and built completely in India. As tensions between China and the US continue to rise, it’s no surprise that American firms would be quick to support a company refusing Chinese tech components. Although China’s Huawei is a leader in the 5G race, many nations have rejected the help of a Chinese company in building their 5G network. Given this, Jio now stands in a favourable position to capitalize on this opportunity and fill the gap.
As Jio’s investment appeal has been made clear, it is important to analyze why Reliance’s Founder and other stakeholders are so willing to give away their company stakes. First and foremost, Reliance had set a goal of becoming debt-free by March 2021, and the quickest way to do so is to attract investment capital. The company acquired copious amounts of debt to launch Jio 4G back in September 2016 and now wishes to earn profit by selling parts of its stake to investors before listing Jio on the stock market. Using its successful strategy, Jio already accomplished its debt-free goal, several months before the initial deadline. As an Indian company, Jio will also reap the benefits of doing business in a nation with a population of over 1.3 billion. The Indian market has enormous potential in terms of digitization, given that many Indians still do not enjoy access to proper Internet networks. Thus, Jio’s mission of connectivity could not be more appropriate.
Overall, Jio has proven its value to the right crowd at the right time. As of July 3, Reliance (RIL) shares officially doubled since the end of March, with a record increase of 1.9% on that Friday alone. Founder Mukesh Ambani has climbed the ranks to become the richest man in Asia, surpassing Jack Ma of China, the founder of Alibaba. Ambani is now ranked eighth in the Bloomberg Billionaires Index with a total net worth of $68.3 billion.
While a tragedy for humanity, the pandemic has been nothing but good news for India’s digital businesses, with Jio leading the pack. Backed by the world’s top firms, Jio’s future is bright to secure India’s spot at the front line of spearheading digital leadership.
Editor’s Note: All values mentioned are in USD unless stated otherwise.