Silicon Valley private equity firm Silver Lake has agreed to invest Rs56.6bn ($750m) in Reliance Jio, less than two weeks after Facebook took a $5.7bn stake in Mukesh Ambani’s fast-growing Indian digital services company.
Jio, backed by Mr Ambani’s oil-to-retail conglomerate Reliance Industries, has attracted 388m 4G telecom subscribers since it was launched by India’s richest man in 2016. It has since diversified into a range of services from ecommerce to broadband and streaming.
Facebook announced last month that it would pay $5.7bn for 10 per cent of Jio, its second-largest investment after buying messaging platform WhatsApp in 2014.
Silver Lake’s backing for Jio values the telecoms company at $65bn, a premium of 12.5 per cent to the valuation implied by the Facebook deal.
The investments come as deep-pocketed buyers such as Silver Lake, the technology-focused firm with $40bn in assets under management, seek opportunities as coronavirus reshapes markets around the world.
$65bn Value of Reliance Jio implied by Silver Lake’s investment
Last month, Silver Lake invested in Expedia and Airbnb, which have both been hit by strain in the travel and hospitality industries. In March, the buyout group invested $1bn in social media site Twitter to help broker a ceasefire with the activist hedge fund Elliott Management.
For Reliance, the investment is an endorsement of Mr Ambani’s ambition to create a homegrown Indian tech company to rival Silicon Valley’s heavyweights.
“Silver Lake has an outstanding record of being a valuable partner for leading technology companies globally,” Mr Ambani said. “Silver Lake is one of the most respected voices in technology and finance.”
Jio helped to accelerate internet adoption in India by offering users cut-price 4G contracts and has sought to build out a suite of online services. In announcing Facebook’s investment, Jio said it would partner with WhatsApp, which has about 400m users in India, to power an ecommerce service aimed at groceries and everyday essentials.
Jio has “brought extraordinary engineering capabilities to bear on bringing the power of low-cost digital services to a mass consumer and small businesses population”, Egon Durban, Silver Lake’s co-chief executive, said. “The market potential they are addressing is enormous.”
The investment is another step in Reliance’s efforts to cut its net debt, which ballooned to more than $20bn as part of the costs of building Jio. Mr Ambani has vowed to reduce net debt to zero by March 2021.
In addition to bringing on new investors, Reliance last week announced a rights issue worth $7bn — India’s largest ever — as part of its fundraising drive.
Its lucrative core business in oil refining and petrochemicals has been hard hit by turmoil in global oil markets, with net profit in the quarter through March falling 37 per cent.
A deal unveiled last year for Saudi Aramco to take a 20 per cent stake in its oil-and-chemicals arm has still not closed, though Reliance says it remains on track.