Is 'Jio Platforms' benefiting from FOMO investing?
This rush of marqee global investors for investing in Reliance's digital venture "Jio platforms" seems more like a case of FOMO (fear of missing out) investing.
Make no mistake, getting global investing heavyweights to queue up for investing in your project, in this global recession is no mean feat. Not only does it restore India's credibility on the world map as a preferred FDI ( foreign direct investment) destination, but also reassures the world of the consumption story of the Indian household and it's future potential.
Jio platforms is the digital arm of Reliance Industries, which is an Indian conglomerate and was until recently an oil heavyweight. It's owner and Managing Director Mukesh Ambani has been in constant race with Alibaba's Jack Ma as the richest Asian. Both of them have been exchanging places for Richest Asian position.
It is quite bewildering to know, how an oil heavyweight company comes up with a digital venture with no prior experience and investors make a run at it, as there is no tomorrow. Let's try to understand the method behind the madness.
Jio platforms as we know is a digital venture of Reliance industries, it consolidates all digital resources of it's consumer facing business. This makes it really rich in data. It aims at creating a digital ecosystem which will enable customers to buy online, small and medium businesses to sell online, payment collection online i.e full end to end digital living experience. Though Jio platforms has been in news recently due to a numbers of big technology and PE investments, it's history stretches back to 2010 when Reliance Industries took a 95% stake in IBSL (Infotel broadband services limited).
IBSL had spent $2.7 Billion in Indian broadband spectrum auction in 2010, winning access to bands in 22 Indian states. The Reliance deal happened shortly after, raising speculations of prearranged buying arrangements, but regulatory body eventually cleared any wrongdoing. In 2013 IBSL turned into Jio platforms. Jio platforms now owns and operates several digital ventures such as Jio Infocom (the top telecom operator in India), digital apps and services including music streaming service, on demand live television and payment app, broadband and smartphone business etc.
The investment cycle started with unexpected news of Facebook taking a 9.99% stake in Jio platforms for Rs 43,574 crore ($5.7 Billion) on April 22. Which was followed by global tech investor Silver lake investing 5,655.75 crore ($750 Million) at a 12.5% premium to the Facebook investment, for a 1.15% stake in the platform. Vista equity partners invest Rs 11,367 crore ($1.47 Billion) at an equity value of 4.91 lakh crore and an enterprise value of Rs 5.16 lakh crore, amounting to a 2.32% equity stake in Jio platforms. General Atlantic is another investor has invested around Rs 6,598.38 crore ($857 Million) for a 1.34% stake. And last but not the least on Friday, KKR announced it will invest Rs 11,367 crore ($1.5 Billion) for a 2.32% stake.
The pattern seems to suggest, it is some kind of safe heaven investment that nobody wants to miss. Also, investors know very well, every-time an investment happens, the valuation goes up and thus their entry as a new investor becomes all the more expensive, so they are looking to jump in early. All this is correct at a time when the global economy is shrinking and investors are hard pressed without options to invest in a fairly safe asset which might give average returns in the medium term. It is also true that Jio platforms valuation is now more than Reliance Industries's all other businesses combined, suggesting the change in stance on the group as a whole. It is pivoting to a new technology and digital based future than the earlier oil avatar. Whatever may be the reason, this FOMO among investors is good news for Jio platforms, Reliance Industries and India as a whole. We are looking like one of the bright stars in the otherwise dark sky.
Jio platforms is the digital arm of Reliance Industries, which is an Indian conglomerate and was until recently an oil heavyweight. It's owner and Managing Director Mukesh Ambani has been in constant race with Alibaba's Jack Ma as the richest Asian. Both of them have been exchanging places for Richest Asian position.
It is quite bewildering to know, how an oil heavyweight company comes up with a digital venture with no prior experience and investors make a run at it, as there is no tomorrow. Let's try to understand the method behind the madness.
Jio platforms as we know is a digital venture of Reliance industries, it consolidates all digital resources of it's consumer facing business. This makes it really rich in data. It aims at creating a digital ecosystem which will enable customers to buy online, small and medium businesses to sell online, payment collection online i.e full end to end digital living experience. Though Jio platforms has been in news recently due to a numbers of big technology and PE investments, it's history stretches back to 2010 when Reliance Industries took a 95% stake in IBSL (Infotel broadband services limited).
IBSL had spent $2.7 Billion in Indian broadband spectrum auction in 2010, winning access to bands in 22 Indian states. The Reliance deal happened shortly after, raising speculations of prearranged buying arrangements, but regulatory body eventually cleared any wrongdoing. In 2013 IBSL turned into Jio platforms. Jio platforms now owns and operates several digital ventures such as Jio Infocom (the top telecom operator in India), digital apps and services including music streaming service, on demand live television and payment app, broadband and smartphone business etc.
The investment cycle started with unexpected news of Facebook taking a 9.99% stake in Jio platforms for Rs 43,574 crore ($5.7 Billion) on April 22. Which was followed by global tech investor Silver lake investing 5,655.75 crore ($750 Million) at a 12.5% premium to the Facebook investment, for a 1.15% stake in the platform. Vista equity partners invest Rs 11,367 crore ($1.47 Billion) at an equity value of 4.91 lakh crore and an enterprise value of Rs 5.16 lakh crore, amounting to a 2.32% equity stake in Jio platforms. General Atlantic is another investor has invested around Rs 6,598.38 crore ($857 Million) for a 1.34% stake. And last but not the least on Friday, KKR announced it will invest Rs 11,367 crore ($1.5 Billion) for a 2.32% stake.
The pattern seems to suggest, it is some kind of safe heaven investment that nobody wants to miss. Also, investors know very well, every-time an investment happens, the valuation goes up and thus their entry as a new investor becomes all the more expensive, so they are looking to jump in early. All this is correct at a time when the global economy is shrinking and investors are hard pressed without options to invest in a fairly safe asset which might give average returns in the medium term. It is also true that Jio platforms valuation is now more than Reliance Industries's all other businesses combined, suggesting the change in stance on the group as a whole. It is pivoting to a new technology and digital based future than the earlier oil avatar. Whatever may be the reason, this FOMO among investors is good news for Jio platforms, Reliance Industries and India as a whole. We are looking like one of the bright stars in the otherwise dark sky.
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