A BIG YES FROM JIO TO FACEBOOK’S FRIEND REQUEST

A BIG YES FROM JIO TO FACEBOOK’S FRIEND REQUEST

This deal will give the much required boost to the small businesses around the country and their expansion on digital platforms.

In a time when the world is facing a never seen before pandemic and its implications on the economic sector, there comes a big breaking news from the business world where Mukesh Ambani's reliance joined hands with Mark Zuckerberg's  Facebook. This deal will give the much required boost to the small businesses around the country and their expansion on digital platforms. Once this deal comes into force it will further enable these small businesses to cater a much larger customer base by using these tech giant’s  outreach level into the Indian market. The Industry expert have welcomed this deal. Lets dig deeper into the fine details we have about this deal.
 

WHAT THIS DEAL IS ALL ABOUT?

Reliance Industries Ltd, its subsidiary Jio Platforms Ltd and Facebook Inc. have signed binding agreements of a big amount worth rupees 43,574 crore. By this deal Facebook Inc will hold 9.99% stake in Jio Platforms Ltd. As per the new agreement, WhatsApp will act as a medium which will enhance and speed up Reliance Industries Limited e-commerce business on the JioMart platform in return Jio Platforms Ltd Will be supporting small sized businesses on WhatsApp seemingly a win-win situation for both the groups.
A brief details of Reliance Industries Limited is required to understand the things in a better way : 

  • Number of cities in which Reliance Industries Limited  is operating – 6700
  • Number of retail stores area Reliance Industries Limited  has - over 10900
  • Financial Year 2019 turnover -130566 crore
  • EBITDA (Earnings Before Interest Taxes Depreciation and Amortisation) in Financial Year 2019 - 6201 crore.
  • Number of employees -125000.
  • Loyalty base- hundred million.
  • Number of people Reliance Industries Limited  Serves every week- more than 5 million
     

Reliance Industries Limited and Facebook first tie-up will be a venture of  e-commerce sector Known as JioMart. JioMart will provide a platform to local Vendors, Kirana stores to use its platform for listing their products for a major outreach to those customers whom they are not able to serve currently. They are running their pilot project in selected city's of Maharashtra such as Kalyan, Thane and Navi Mumbai.

We all know WhatsApp is already a actively major platform for small businesses in India. These businesses are actively using WhatsApp business to promote their business in a better and efficient manner.

Both the groups have their own payment applications. Reliance has Jio Money app where is Whats App has Whats App pay app which was launched back in February 2018 in India on a trial basis. Recently Whats App pay has been approved by national payments Corporation of India NPCI to roll out its services in a phasic manner.
 

WHY FACEBOOK  HAS ENTERED INTO THIS DEAL?

Another theory which is doing the rounds is the reason why Mark Zuckerberg's Facebook has invested this big in Jio. This theory suggests that there had been a severe scrutiny of this tech giant. By investing in Mukesh Ambani's Jio, Facebook Inc. appears to be buying protection. There might be some truth in this theory as we all know that what'sApp Pay had to encounter every single obstruction and scrutiny in rolling out their payment services in India. Although at a later stage, they were allowed to roll out their payment services in a phased manner.

Through this deal, the Facebook will enjoy complex free environment in India . The venture between both the big giants in this pandemic situation has brought a sigh of relief to the economy around the world.
 

KEY TAKE OUTS OF THIS DEAL FOR THE PARTIES INVOLVED

The deal will sufficiently enable JioMart to compete with the big players such as Amazon and Walmart [Flipkart] in India more efficiently.

This deal has enabled the Jio platform is limited as the fifth biggest form considering capitalisation of market for listed companies in India, the list stands as follows –

  • Reliance industries Ltd
  • Tata consultancy services
  • HDFC bank
  • Hindustan Unilever
  • Jio Platforms Ltd
  • HDFC
  • Bharti Airtel
  • Infosys
  • ITC
  • Kotak Mahindra
     

The parent company of JPL is aiming to make JPL debt free. And in order to achieve the same they have infused a whopping amount of 1.08 lakh crore. They want JPL to be in the league of Google and Alibaba the companies which claim high valuations in the global market.

This deal will also help in achieving that goal as far as JPL is concerned. Debt situation of reliance India Ltd in last five fiscals can be summarised as follows –

YEAR
 

FY15

FY16

FY17

FY18

FY19

Sept 19

GROSS DEBT
 

1,60,860

1,81,079

1,96,599

2,18,763

2,87,505

2,91,982

CASH & CASH EQUITABLE

84,472

86,033

77,226

78,063

1,33,027

1,34,746

NET DEBT
 

76,388

95,046

1,19,373

1,40,700

1,54,478

1,57,236

*All figures in Rs crore:

Source: Company annual report and communication

  • This deal seems to be a deadly combo as it will be having both the requirements of succeeding in e-commerce sector it will be providing a marketplace as well as the payment solution also.
  • In a time of the coronavirus pandemic this deal is an indicative of India's potential in the post-pandemic Era moreover it is pertinent to note that this is the largest FDI in this sector in India.
  • This deal will surely elevate Facebook’s penetration in India. Currently, it is having 400 million users across its various platforms. This number is surely going to increase after this deal.
  • This deal will further enable Facebook to launch its payment application in a hassle free environment due to the presence of a local partner.
  • This deal could also commence the implementation of cryptocurrency and Blockchain system as Facebook has already developed it’s own cryptocurrency known as “Libra”.
     
THE DEAL AND THE QUESTIONS

The Industry expert of India and all the big business houses have welcomed this deal. This mega deal is said to have major implications on e-commerce marketplace and internet sector but at the same time the role of regulatory authorities in India such as Competition Commission of India (CCI)  and Telecom Regulatory Authority of India (TRAI) are going to be in limelight. It is yet to be seen how these regulatory bodies will react to this deal as this deal poses few questions and concerns on data sharing, net neutrality and monopoly. As we all know that the competition rules in India are much recently formed as compared to that of the western countries. It seems the best time to have a major re-look into these rules to address the concerns which are raised by such deals. 
    
As for the competition policies are concerned this deal will definitely undergo every minute scrutiny by the competition commission of India. Both the companies hold a big name in the business world. The size of the companies the extent of the market which both these companies cover and their proposed business model as per this deal poses a very complicated law issues. These issues will be scrutinised before a go ahead call.
 

CONCLUSION

The deal between this two big tech giants in this pandemic situation have bought a ease in the economy as in the current situation such deal is being praised by all the experts around India and the world at large. The deal have paved a way for the other big companies of India to invite FDI. But at the same time concerns which are being raised regarding the cryptic details about this deal should also be addressed properly at the level of regulatory authorities.
 

EDITED BY TEAM CLIQTAX