How the Giant Reliance Jio-Facebook Deal Will Boost Local Kirana Business

Money Matters

How the Giant Reliance Jio-Facebook Deal Will Boost Local Kirana Business

Illustration: Reynold Mascarenhas

How to make the most out of working from home? Ask India’s richest man Mukesh Ambani. Even as India continues to be under lockdown and businesses have their wings clipped, Ambani attracted a ₹43,574-crore investment from Mark Zuckerberg. Facebook’s 9.99 per cent stake in Reliance Jio is the largest foreign direct investment in India’s tech sector.

The deal with Facebook will empower Jio Mart, Jio’s new commerce platform, to connect with over 3 crore kirana stores with the help of WhatsApp, Facebook’s messaging platform. Mukesh Ambani issued a video statement saying JioMart and WhatsApp will help small Indian kirana shops to digitally transcat with customers in their neighbourhood, facilitating fast delivery of day-to-day items. He ended the address wishing everyone good health, and stating that “Corona harega, India jeetega.”

In a statement, Reliance Jio said, “The investment values Jio Platforms amongst the top five listed companies in India by market capitalisation, within just three and a half years of launch of commercial services. This partnership will accelerate India’s all round development, fulfilling the needs of the Indian people and the Indian economy.”

Zuckerberg emphasised on the need to go digital. “With communities around the world in lockdown, entrepreneurs need digital tools to find and communicate with customers. This is something we can help with – and that’s why we’re partnering with Jio,” he said in a video statement.

Analysts say that the Facebook-Reliance deal lends confidence to India’s telecom sector and paves the way for RIL to become a net debt-free company by 2021. “As of December 31, 2019, the net debt for the group stood at ₹1,531 billion and with Facebook’s investment, this should put RIL on course to be net debt free by March 2021,” analysts at Credit Suisse said in a note.

The deal comes at a time when Facebook has been under scrutiny worldwide for not protecting user privacy and there are concerns around WhatsApp facilitating the spread of fake news. On the other hand, Mukesh Ambani is looking to reduce debt with the petroleum business facing uncertainty due to crashing oil prices. After the failure of “Free Basics” in India on net neutrality grounds, Mark needs to find his mojo back in the Indian market and who better to help him navigate it than Mukesh Ambani? And for Ambani, this funding will help Jio invest in technology at a time when rival operators are struggling to survive.

Conversations around data privacy, net neutrality, and fairplay are once again set to take centrestage after Facebook and Jio try to converge synergies around WhatsApp, e-commerce, and payments. Tech journalists have advised a word of caution, suggesting we must all be watchful.

Reliance’s stock price saw a surge of around eight per cent after the announcement, hitting a six-week high.