A strike of globalization

Last week Facebook, headed by Mark Zuckerberg, announced that it is investing Rs 43,574 crores into Reliance Jio, headed by Mukesh Ambani for 9.99% stake.

With a large customer base in India, 388 million customers for Reliance Jio, 400 million customers for Whatsapp and 300 million customers for Facebook make this deal a good bet on developing market like India which is in the phase of drastic digital transformation.

The basic business plan is to bring together Jio Mart, small-business initiative of Jio, with whatsapp payment platform enabling people to connect with merchants and purchase the products.

Getting into Business

Though the story is pretty smooth and straight like friends making favours to each other, remember any move made is always a business for the respective company.

What’s in it for Facebook?

Facebook tried different ways to monopolize Indian Internet market
First, by proposing “Free Basics” plan which was turned down by TRAI as it was violating the net neutrality.
Second, tried to launch Express wifi in non-urban areas but ended in vain.

But this time it has hit hard by teaming up with Jio. This investment gives Facebook an opportunity to observe India’s e-commerce business closely and become a competitor in the market and also introduce Whatsapp payment services in India(which was repeatedly turned down) in a more dynamic way which will be used by businesses to make and receive payments.

What’s in it for Jio?

Jio had many business plans namely e-commerce, establish data centers, fiber internet to households and businesses and more. But not to forget Jio is a subsidiary of Reliance Group, it is funded by the parent company and has debt close to 1.5 Lakh crore rupees. Recently, in last August , Mukesh Ambani announced that he will make the Reliance group debt free by March 2021 and thanks to Aramco deal worth of 1.1 Lakh crore rupees along with company’s cash reserves it sent a positive vibe to the share holders. But we know things didn’t go as planned, with the delay in deal with Aramco and then crash in oil price and decreasing value of the share price, share holders need a solution now and then Facebook came to its rescue.

With money that is coming in Jio can clear part of its debt and also expand its business as planned and no wonder this deal attracted the market in such pandemic situations and as a result the share price kept on increasing decently by which share holders should have been impressed by now.

Implications

Facebook already made few investments in Indian startup businesses namely Unacademy, Meesho and also acquired Eye labs and proved it is an ally to Indian economy and with the recent investment in Jio it gave a heads up to its competitors to jump into their shoes and start running. As a result Amazon ramped up its pilot program “Local shops on Amazon”.

With the two data giants coming together, this deal managed to attract every eye in the market and the phenomenon they are about to create in small businesses market which is a major contributor to the economy. Beware about the disruption Jio created in the telecom sector.

There are about 30 million retail stores in India for whom the online platform will be created through JioMart, and businesses are well aware that there should always be an extra option to serve the customer in online platform, so it is pretty clear that Facebook will be making more investments in startups as well as other giants in India offering its payment and social networking platforms and Jio will encourage other global technical giants to make investments in Jio to serve the customers in a better way.

With this deal India has proved that there are efficient companies running in the country and in such pandemic situations companies with enough cash reserves looking out for investments will turn their heads to technically efficient Indian companies struggling financially helping them sustain the current slowdown and help maintaining the economy

Stay tuned for more disruptions!!!

 

Author is a MBA Student of Symbiosis Institute of Business Management, Hyderabad 

3 comments

Leave a Reply

Your email address will not be published. Required fields are marked *