US private equity firm Silver Lake has followed Facebook into India, making an investment 56.6 billion Indian rupees ($747 million) in Reliance Jio, the country's biggest operator, for a 1.15% stake. Its move came shortly after Facebook invested $5.7 billion for a 9.9% stake. (See Facebook places huge bet on India with $5.7B Jio stake.)
With the transaction subject to regulatory approval, the investment values the operator at about INR4.9 trillion ($64.7 billion). Interestingly, Silver Lake's investment represents a 10% premium to Facebook's deal, which was announced barely a fortnight ago.
Silver Lake is a prominent US investor group and has around $40 billion in combined assets under management and committed capital. It has invested in several well-known and prominent technology and financial firms, including Airbnb, Alibaba, Ant Financial, Alphabet's Verily, Twitter, Dell Technologies and Waymo Units.
The investment will help Jio to clear its debt of around INR400 billion ($5.2 billion), in line with a previously announced target to have zero net debt by March 2021. It will also give Jio funds to support customer growth initiatives and develop new products for India's market.
Moreover, it propels Jio into the same league as some of the world's biggest global technology firms, much to the discomfort of Indian rivals Bharti Airtel and Vodafone Idea. Jio could stand to gain an important advantage from Facebook's technology prowess and Silver Lake's business influence.
"For Jio, this deal will help to increase its visibility, amplify its investments in infrastructure, build more partnerships and, thereby, offer more value to its customers," says Benoy CS, the vice president of the digital transformation practice of Frost & Sullivan, in a note. "It also endorses the technology capability Jio has built using futuristic and cutting-edge technologies."
"For Silver Lake, this will help in diversifying its portfolio into more regions and tap into the growth potential of India," he adds. "After this initial foray into India, we can expect more investments from Silver Lake, as they look to tap into the growth potential of the Indian ICT industry."
Jio reckons the deal has special significance against the backdrop of the coronavirus pandemic. "Comprehensive digitization will be a vital component of the revitalization of the Indian economy," it says. "It is our strong conviction that no one should be deprived of the tremendous opportunities, including those for new employment and new businesses, embedded in India's 360-degree digital transformation."
"They [Jio] have brought extraordinary engineering capabilities to bear on bringing the power of low-cost digital services to a mass consumer and small business population," said Egon Durban, Silver Lake's co-CEO and managing partner. "The market potential they are addressing is enormous."
India's ICT industry could also stand to benefit from the deal, according to Benoy. "The biggest impact is the global attention that Facebook and Silver Lake investment have brought on the Indian ICT industry," he explains. "This is the beginning of a shift in the tide of investments towards the Indian technology industry."
— Gagandeep Kaur, contributing editor, special to Light Reading