Things That Made Investors Pounce on Jio

Summary

• Reliance Industries’ Chairman Mukesh Ambani has seen his net worth soar higher in the recent months, becoming the world’s fifth richest man. Reliance Industries has been aggressively divesting stakes in its digital business, which has attracted a range of investors.
• Jio, primarily a telecom player in India, has spread its wings into a whole set of digital services and invested in future technologies. Now, Jio is looking to further edge by partnering with strategic investors.
• Over the years, the conglomerate had a lot of debt in its balance sheet, and stake sale in Jio and a rights issue is being undertaken by Reliance to reduce its debt position.

Of late, Reliance Industries Limited (RIL) – an Indian conglomerate business – has been on a funding spree after selling stakes in its telecommunications and digital business, Jio Platforms Limited. Large and deep-pocketed investors had lined up for the investment in Jio Platforms.

Reliance Industries is run by Mukesh Ambani, who is climbing in the rich list and is currently the fifth richest man, globally, as RIL shares continue flirting with lifetime highs. RIL is present in the fields of retail, digital services, petrochemicals, petroleum refining and marketing, media & entertainment, and oil & gas exploration and production.

But the conglomerate has taken a lot of leverage in the launch of its digital services business and other growth plans. It is undertaking a capital raising program, through a recently completed rights issue and investments by global tech investors in Jio Platforms Limited.

Most recently, Google has committed to acquire a 7.73% stake in Jio Platforms, with the two companies working towards the development of smartphones in India. In April, Facebook acquired a 9.99% stake in Jio Platforms. Over the months, Reliance has attracted a number of investors for Jio, including Vista Equity Partners, KKR, Mubadala, ADIA, TPG, L Catterton, The Public Investment Fund, Silver Lake, General Atlantic, Intel, and Qualcomm.

Reliance Jio – The Leading Mobile Telecom Operator

Over the years, Reliance Industries has invested substantial capital in the development of Jio as a brand and its services. In telecommunications, Jio broke into the scene with free SIM cards, data and calling for its customers, effectively dismantling the telecom industry and sparking consolidation as well as bankruptcies.

In December 2015, Jio beta was launched, and it was made publicly available in September next year. Now, it is the largest mobile operator in India. At the end of March 2020 (FY20), Jio had 387.5 million subscribers.

Jio’s 4G footprint in India is backed by tower infrastructure and best fibre in the country. Average data per user consumption was more than 11 GB/month, according to the company’s annual report for FY20. Its pricing has been the main driver of large-scale adoption and leading market share. Its telecom footprint is also upgradable to 5G.

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Jio’s services span across connectivity and cloud, media, digital commerce, financial services, gaming, education, healthcare, agriculture, Government to Citizen (G2C), smart cities and manufacturing.

It continues to have significant room for growth in wireline infrastructure, as Indian consumers have lagged in fixed broadband services, and fibre penetration is significantly lower compared to global benchmarks.

Jio Platforms Limited - Creating Total Digital Solutions

Reliance has invested over US$50 billion in Jio since its inception. Now Jio is embarking on a new journey with new growth areas, including gaming, education, healthcare, agriculture, mixed reality, Narrow Band IoT, IaaS/PaaS, and manufacturing.

During the year, Jio conducted restructuring of the digital businesses and placed them under Jio Platforms Limited, which is now equipped with world-class and future proof digital assets. Jio Platforms has all digital assets of Reliance spanning across connectivity and technology investments.

The restructuring has enabled to incorporate a debt-free and financially strong holding company, which is able to pursue growth opportunities, strategic investments and partnerships. Facebook’s investment in Jio Platforms is aimed at increasing digital capabilities of India.

Jio and Facebook would emphasise on micro, small and medium enterprises, small merchants and SMEs in the informal sector. WhatsApp, Reliance Retail and Jio Platforms also penned a commercial agreement, which would see further progress on the digital commerce business of Reliance Retail on the JioMart platform using WhatsApp.

In August last year, Jio and Microsoft started a long-term comprehensive strategic relationship, aimed at digital transformation of India. The 10-year commitment comprises a set of solutions, including storage, connectivity, computing, applications and technology.

Jio’s 4G platform is ready to transition into 5G and beyond. It has incorporated further capabilities like Software Defined Networking (SDN), Network Function Virtualisation (NFV), in-house data centre capacity, and investments into Content Distribution Network (CDN).

It is also monetising its infrastructure assets, which include 175k towers and 1.1 million kilometres route for fibre. Infrastructure assets have already been transferred via a scheme, held through 2 separate Infrastructure Investment Trusts (InvIT). Brookfield and affiliates have acquired a stake in Tower InvIT, and discussions are underway for Fiber InvIT.

Jio plans to embark on tapping fixed broadband services across fibre-to-the-home and enterprises. It is also creating a multi-terabyte capacity of international fibre networks. Jio and its partners are creating undersea networks of cable systems, connecting South East Asia, Middle East, Europe, Africa, Far East, and more.

It has also invested in future technologies, including mixed reality, blockchain, big data, IoT, computer vision, secure identity, AI/ML, supercomputing, robotics, IaaS, and PaaS. Some of these investments are augmenting the services offered by Jio, while others would drive the launch of Jio’s next set of digital offerings.