Google will acquire a 7.7% stake in Jio Platforms for ₹33,737 crore, the culmination of a series of global investments that have cumulatively brought more than ₹1.52 lakh crore ($20 billion) into Reliance Industries’ technology and telecom arm.
In future, there will be strategic partnerships in retail and petrochemicals and the energy business that will be overhauled, RIL chairman Mukesh Ambani said.
Ambani said RIL was “truly blessed” to have Google, Facebook and Microsoft as partners, the latter in a separate foray into cloud services.
For Google, this is the “first and biggest investment” from the recently announced $10-billion India fund, CEO Sundar Pichai said. The two companies will jointly develop an operating system for an entry-level smartphone that will support 5G and target India’s 350 million feature-phone users.
This would be a rare instance of two FANG – Facebook, Apple, Netflix, Google – companies investing in one firm anywhere in the world and is another stamp of approval from global digital behemoths who now accept RIL turning a technology and digital firm from an energy to retail focussed conglomerate, say analysts. Facebook has invested Rs 43,574 crore for a 9.9% stake.
Shares of parent RIL closed at Rs 1845.60, down by 3.71% on the BSE on Wednesday.
“We welcome Google onboard and are excited about our partnership for what it can deliver to Indians, from universalising Internet usage to deepening the new digital economy and providing a prime mover to India’s economic growth,” said Mukesh Ambani, Chairman and Managing Director of Reliance Industries.
Jio Platforms houses RIL’s telecom business under Reliance Jio Infocomm, which is the largest in the country with nearly 400 million subscribers, besides other digital properties and investments.
With this, the total investment from financial and strategic investors into Jio Platforms stands at Rs 1,52,056 crore for a combined 32.97% stake in about two months. Google’s investment in Jio Platforms comes at an equity valuation of Rs. 4.36 lakh crore, lower than the Rs 4.62 lakh crore that Facebook had invested at in April. The Google deal is subject to regulatory approvals.
The partnership is a multi-pronged one and the two companies have entered a commercial agreement to jointly develop an entry level affordable smartphone with optimizations to the Android operating system and the Play Store. The smartphone that will even support 5G is targeted at the 350 million feature phone users in India.
“We think the time is right to increase our commitment to India significantly, in collaboration with local companies, and partnership with Jio is the first step. We want to work with Jio and other leaders in the local ecosystem to ensure that smartphones-together with the apps and services in the Play Store-are within reach for many more Indians across the country,” said Google in a blog post.
Jio so far had offered Jio Phone -a 4G feature phone again targeting the same audience who are yet to migrate from their 2G feature phone anf so far has sold above 100 million.
“Everyone should have access to the internet. Proud to partner with @reliancejio to increase access for the hundreds of millions in India who don’t own a smartphone with our 1st investment of $4.5B from the #GoogleForIndia Digitization Fund”, tweeted Sundar Pichai, CEO of Google and Alphabet on Wednesday.
The investment from Google comes in at a time when the number of internet users in India is expected to rise to about 850 million in 2022, according to PwC, up from 450 million in 2017.
Google already dominates search, video, maps and email in India. Nine out of 10 smartphones sold in India come with Google’s Android OS. RIL has been making efforts to position Jio Platforms and its telecom venture Reliance Jio Infocomm as more digital, consumer technology companies, with experts saying key investors it has brought on board underline that strategy.
“The pace and scale of digital transformation in India is hugely inspiring for us and reinforces our view that building products for India first helps us build better products for users everywhere,” Pichai added in a statement.
Besides Google and Facebook, the eleven other investors include-Qualcomm ventures, Intel Capital, Abu Dhabi’s two largest sovereign investment arms – Abu Dhabi Investment Authority and Mubadala, private equity firms Silver Lake (which invested in two tranches), Vista Equity Partners, General Atlantic, KKR, TPG, L Catterton and Saudi Arabia’s Public Investment Fund (PIF), have invested in Jio Platforms.
The investments and a Rs 53,124-crore rights issue has helped RIL pare debt and in June the conglomerate said it was debt free.