Jio valuation jumps on prospect of digital India

Jio logoThe Abu Dhabi Investment Authority (ADIA) has bought a 1.15% stake in Jio Platforms for $750m  in a deal that has seen the value of the Indian digital services company jump by 14% to $65bn in the three months since Facebook bought a 10% share at the end of March. ADIA joins the growing list of big hitters to have invested in the subsidiary of the Mumbai-based Reliance Industries (RIL) conglomerate, attracted  partly by the prospect of the digitalisation of the Indian countryside.. Four US-based private equity firms – Silver Lake, Vista, General Atlantic, and KKR – have each also bought stakes at a premium since Facebook pitched in.
Indian industrialist Mukesh Ambani launched Jio Platforms in 2019 as an umbrella for RIL’s digital operations three years after he launched the Jio mobile service on the back of an aggressive marketing campaign that offered free calls and near-free data. Since then, Jio has built up a customer base of 388 million subscriber and  in the process has driven several incumbents out of the market and prompted a wave of mergers and consolidation. But its success has come at a price – approximately $20bn of debt, to be precise.
Historically a hydrocarbon-based operation, RIL has recently been adversely affected by the collapse in domestic demand for energy that followed Prime Minister Narendra Modi’s harsh and abrupt lockdown at the beginning of April. This has more or less forced Ambani to look Mukesh Ambani Chairman RILto reduce that debt mountain and finance further growth by diluting his ownership in RIL’s digital subsidiary.
The alacrity with which Facebook and ADIA have jumped at the opportunity to buy into Jio, however, smacks of more than mere opportunism; it is also a clear signal that some very smart businessmen including Marc Zuckerberg agree with Ambani’s frequently expressed opinion that data is the new oil.
They also appear to approve of his decision to rebrand RIL as a software company engaged in the development of ‘an ecosystem of new digital technology platforms’ and to position Jio as the go-to digital platform behind India’s economic development. “RIL’s growth in the digital technology business, based on asset-light platforms of the future, will be nonlinear and exponential,” he said at the launch of a rights issue last month, which he intends to use to drive the increasingly rapid penetration of internet usage across the Indian countryside and to make education, health, and agri-knowledge widely available within its rural communities. According to a new report from the Internet & Mobile Association of India (IAMAI), rural internet users now outnumber their urban counterparts for the first time. As of last November, India had a total of 504 million active internet users.
Ambani now plans to list the company in around five year’s time.