Facebook invests in Reliance; strong value unlocking on cards

In one of the biggest deal in the recent history, Reliance Industries has informed that the global social media giant, Facebook will invest Rs 43,574 crore in Reliance’s subsidiary for digital services-Jio Platforms. The deal is also termed as the largest FDI for minority investment in India.

The investment has a strong value unlocking opportunity for the company. The statement from the company to the stock exchanges said that Facebook’s investment values Jio Platforms at Rs 4.62 lakh crore pre-money enterprises, resulting to USD 65.95 billion, at the exchange rate of Rs 70 per USD. The amount translates into 9.99 per cent equity stake in Jio Platforms on a fully-diluted basis. It further added that the investment translates Jio Platforms as part of the top-five listed companies in India by market capitalisation.

Reliance Industries (RIL) has taken a few important and aggressive steps to achieve its debt reduction target. The company, as of September 2019 balance sheet, reported consolidated borrowing figure at Rs 2,52,190 crore. Major part of this amount is attributed to the large expansion of Jio, which was launched at USD 40 billion in 2016.

The deal with Facebook will help RIL to reduce the debt burden. This also has a scope of further expansion when RIL will stage itself for new spectrum auctions.

The stock price reaction in the early trades on Wednesday, suggests the strategic importance of the deal. The stock opened higher by seven per cent on BSE.