Share Market Rallied on the wings of Facebook-Reliance Jio Deal

In the wake of Facebook-Reliance Jio deal, largest FDI in India’s technology sector, share market in the country have witnessed a bull run as Nifty Media rises 7% and BSE MidCap, BSE Small Cap up about 1% each. After it was announced that U.S social media major Facebook will invest Rs.43,574 crore into Jio platforms, a unit of Reliance Industries, for a 9.99% shares on Wednesday Mukesh Ambani’s Reliance shares have rallied by 8% in early trade.

The deal which will value the jio digital platforms at Rs: 4.62 lakh crores , could help Mukesh Amabani to reduce debt incurred through Reliance Industries. On the other hand Mark Zuckerberg’s face book obtains a stronger footing in India, one of the company’s largest markets.

Both companies in different statements expressed their intention to work together for creating more commercial opportunities in the country.

“Reliance Industries Limited, Jio Platforms Limited and Facebook, Inc. today announced the signing of binding agreements for an investment of Rs43,574 crore by Facebook into Jio Platforms,” RIL said in a statement on Wednesday. “This investment by Facebook values Jio Platforms at Rs4.62 lakh crore pre-money enterprise value ($65.95 billion, assuming a conversion rate of Rs70 to a US Dollar). Facebook’s investment will translate into a 9.99% equity stake in Jio Platforms on a fully diluted basis,” it added.

“At the core of our partnership is the commitment that Mark Zuckerberg, founder of Facebook, and I share for the all-round digital transformation of India and for serving all Indians…In the post-Corona era, I am confident of India’s economic recovery and resurgence in the shortest period of time. The partnership will surely make an important contribution to this transformation,” said Mukesh Ambani, chairman and MD of RIL in the statement.

“In the very near future, JioMart – Jio’s digital new commerce platform, and Whatsapp – will empower nearly 3 crore small Indian Kirana shops to digitally transact with every customer in their neighbourhood. This means all of you can order and get faster delivery of day-to-day items, from nearby local shops,” Mukesh Ambani added.

At the same time Mark Zuckerberg said in a Facebook post that “This is especially important right now, because small businesses are the core of every economy and they need our support. India has more than 60 million small businesses and millions of people rely on them for jobs. With communities around the world in lockdown, many of these entrepreneurs need digital tools they can rely on to find and communicate with customers and grow their businesses.We’re looking forward to getting started”.

“Our goal is to enable new opportunities for businesses of all sizes, but especially for the more than 60 million small businesses across India. They account for the majority of jobs in the country, and form the heart and soul of rural and urban communities alike. In the face of the coronavirus, it is important that we both combat this global pandemic now, and lay the groundwork to help people and businesses in the years to come,” Facebook said.

It added that “For instance, by bringing together JioMart, Jio’s small business initiative, with the power of WhatsApp, we can enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience.”

Having 388 million subscribers – Reliance Jio – RIL’s telecom unit  will continue to remain a wholly owned subsidiary of Reliance Platform. RIL said that this was the largest investment for a minority stake by a technology company anywhere in the world and the largest FDI in the technology sector in India.