What will Jio do with its recent windfall?

The surge of investments in Jio Platforms, the parent company of Indian telco Reliance Jio, seems to have come to an end, with the company announcing it has raised around $22.3 billion, including its right issue, in the last two months. (See Who's invested what (and why) in India's Jio Platforms?)

Reliance Industries, the owner of Jio Platforms, reported a debt of around $21 billion at the end of March 2020. With its recent investments, it will become debt-free well ahead of its target of March 2021.

These investments possibly signal the beginning of the next phase of growth in the company's trajectory. In the first phase, with 387 million subscribers acquired in under four years, Jio clearly established itself as one of India's foremost players. Its entry also changed the landscape of the Indian telecom industry, with the number of players falling from ten to 12 per circle (service area) to just three private-sector operators.

The next phase possibly involves establishing itself as a technology player and not just a telco. Collaboration with social media giant Facebook, which has taken a bigger stake (nearly 10%), than any other recent investor, is particularly relevant in this context. Jio will look to gain insights from Facebook on how to scale and monetize several apps.

Jio launched several apps, including JioMusic, JioMoney, JioNews, JioTV and JioCinema, way back in 2016, but failed to generate any meaningful interest. But with the ecosystem much better developed than it used to be, and the support of the social media giant, it has far brighter prospects today. Indeed, India now has the second-biggest and fastest-growing Internet user base of any country in the world. Jio, moreover, is also thought to be collaborating with Facebook on the development of a super app with several functionalities.

Table 1: Recent investors in Jio

Investor Investment amount (in $ million) Percentage stake
Facebook 5,755.29 9.99
Silver Lake Partners 747.05 1.15
Vista Equity Partners 1,501.74 2.32
General Atlantic 871.56 1.34
KKR 1,501.74 2.32
Mubadala 1,201.16 1.85
Silver Lake Partners (additional investment) 600.58 0.93
Abu Dhabi Investment Authority 750.73 1.16
TPG 600.58 0.93
L Cattertono 250.24 0.39
PIF 1,501.74 2.32
Total 15,282.41 24.7
Reliance Industries rights issue 7,018.26 N/A
Grand total 22,300.60 N/A
Source: Jio, media reports, Light Reading.

Jio Platforms could be worth as much as $110 billion by the 2022 fiscal year, up from $66 billion now, according to a recent research note issued by BofA Securities. That also says its monthly average revenue per user will rise from INR131 now to INR200 over the same period, based on expected growth in Jio's mobile, home broadband and enterprise segments. Jio hopes to provide wireline services to 50 million homes and 15 million enterprises, according to its annual report. There is also speculation that Jio Platforms might come up with an initial public offering in the coming year.

Jio might also seek to use some of its recent funding for acquisition rather than debt reduction. In recent years, it has acquired firms including SankhyaSutra, Radisys, Haptik, Netradyne, EasyGov, Fynd and Saavn. The coronavirus pandemic has brought down the valuation of some firms, which could boost takeover activity.

Another option would be to use some funds for coverage improvements and 5G development. "Jio, with its 5G-ready network and extensive fiber assets, would play a key role in the development of the 5G ecosystem in India, based on market dynamics," said the company's recent annual report. It also hopes to make use of technologies including artificial intelligence (AI) and blockchain. (See India's Jio wants to test in-house 5G.)

— Gagandeep Kaur, contributing editor, special to Light Reading

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