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Jio + facebook = faith in indian economy

Team ProCapitas
Team ProCapitas

  Why?

 

  • This tie would provide Jio a platform to accelerate its e-commerce launch (Jio Mart) plans in India.
  • In 43,574 Cr deal, Jio have used 28,000 Cr to redeem optionally convertible preference share of RIL. This OCPS would help RIL reduce its debt base.
  • Collaboration with Facebook would help Jio to increase its business base through world’s largest social media platform

facebook

  • On other side, this deal would allow Facebook to get into biggest e-commerce space in the world.
  • With Jio entering the 5G space, Facebook would get the access to the platform it requires to boost its customer base.
  • Facebook plans to use Jio digital base to launch its in pipeline Whatsapp Pay
  • With Reliance on the side, Facebook will get the muscle advantage on the policy issues; working with the government would be way easier.

 

What is there for me?

  • With different prospects coming in for RIL, it might be good time for people holding on RIL shares. RIL have seen a jump of ~17% since deal.
  • Jio e-commerce would break the monopoly by Amazon and Flipkart. In addition, this might be a threat to net neutrality. Given Jio’s control over data, the platform could have competitive advantages.

Hypothesis & Takeaways

  • In such pandemic situation, leading to global economic crisis, this deal is a strong indicator of foreign faith in Indian economy. The statement made by Anand Mahindra also echo’s the same.
  • Facebook (One of the biggest data analytics firm) + Jio (Biggest user database) = data being colonized. We all know what Cambridge Analytica is!
  • 10% stake for $5.7Bn give Jio a mammoth valuation of ~$57Bn. This seems bit high for a telecom company operating mostly on subsidized schemes.
  • Learning from the regulations and scrutiny on FB in west, this move with reliance will sure help them ditch government regulations in India.

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