Facebook will spend $5.7 billion for 10% of Reliance Industries’s digital business, as the social media firm looks to leverage its popular WhatsApp messenger to offer digital payment services to small grocers in India.
Facebook said that its focus would be to create ways for people and businesses to operate more effectively in a digitally growing economy.WhatsApp and Instagram, which are now a major part of lives of Indian people, are also owned by Facebook.
Facebook co-founder and CEO Mark Zuckerberg said, "India is home to the largest communities on Facebook and WhatsApp, and a lot of talented entrepreneurs. The country is in the middle of a major digital transformation and organizations like Jio have played a big part in getting hundreds of millions of Indian people and small businesses online."
“In the near future JioMart … and WhatsApp will empower nearly 30 million small Indian kirana shops to digitally transact with every customer in their neighborhood,” Mukesh Ambani, Reliance’s billionaire CEO said in a video statement.
“The synergy between Jio and Facebook will help realise Prime Minister Shri Narendra Modi’s ‘Digital India’ Mission with its two ambitious goals — ‘Ease of Living’ and ‘Ease of Doing Business’ – for every single category of Indian people without exception,'' said Ambani.
WhatsApp has 400 million users in India, its biggest market. It has been trying to secure approval to roll out its digital payment service in India, to compete with the likes of Google Pay.
India’s online grocery market is lucrative but competitive, with Amazon.com’s Pantry jostling for market share with Walmart’s Flipkart and BigBasket, backed by China’s Alibaba.
But a lot of untapped value lies in India’s kirana stores, or small grocers, lifeblood of the country’s $375 billion grocery industry, according to data from the Retailers Association of India.“Both Jio and Facebook want to tap feature phone users; both have been trying to tap payments and both want to increase grassroots adoption,” said Tarun Pathak, associate director at Hong Kong-based Counterpoint Research.
A marriage of JioMart and WhatsApp services will help reach grassroots users in India who shop from small stores, he said.
Facebook's investment will make it the largest minority shareholder in Jio Platforms, Jio said bit.ly/34Wzy1a on Wednesday, putting the enterprise value of the business at about $66 billion.
Jio Platforms holds a host of Reliance’s digital assets including Jio Infocomm, which has become the country’s largest telco within about three years of its launch. It has roughly 370 million subscribers.
Reliance has also expanded its retail business as profits at its oil and chemical refining business have taken a hit.
But expansion has caused its debt to surge to $40 billion as of September. Reliance has said it wants to cut net debt to zero.
“With crude prices where they are, the main oil and gas business will be under pressure. (The Facebook deal) allows them to cut some debt, and also establish a valuation for the Jio business,” said Rusmik Oza, executive vice president at Kotak Securities.Reliance is also set to sell stakes in its refining business to Saudi Aramco, and in its telecom tower assets to Brookfield.
Last month, Financial Times reported that Facebook was in talks for a stake in Jio, but the talks were halted due amid the pandemic.