Deal with Facebook good for Jio's IPO, say experts

Social media giant Facebook has bought a 9.9 percent stake in Reliance Jio for $5.7 billion (Rs 43,574 crore). The deal values Jio at $65.95 billion, way ahead of analysts' estimates of about $40 billion.

Experts say the deal will be beneficial to both sides. "It’s a win-win situation for both the partners, as on one hand, it gives Facebook a wider audience with Jio’s 388 million clients, it helps Reliance to pay its debt as well as leverage the reach of Whatsapp, Facebook’s chat service," Aamar Deo Singh, Head Advisory, Angel Broking told Moneycontrol.

Concurrent with the investment, Jio Platforms, Reliance Retail and Facebook's WhatsApp have also entered a commercial partnership agreement to further accelerate Reliance Retail’s new commerce business on the JioMart platform using WhatsApp and to support small businesses on WhatsApp, RIL said.

This will help Jio leverage India's 900 million-strong internet user base, which is second only to that of China. Analysts say the deal will also help RIL's long-standing dream of being debt-free by the second half of 2021.

The Facebook-RIL deal may also accelerate the listing of Jio on bourses. Since last year, RIL chairman Mukesh Ambani has been exploring options to take the company public.

Experts say the multi-billion-dollar deal unlocks Jio's true potential of becoming a leading digital company, which, in turn, would attract more investor and help the IPO initiative pick up pace.

"The deal will help Jio become a true digital company in the coming years. Apart, Reliance will be able to reduce its debt and help the company achieve debt-free status by FY21. In short, we believe this deal with Facebook would augur well for Jio IPO (likely in FY20-21) as it would boost investor’s confidence and attract more investment," said Ajit Mishra, VP Research, Religare Broking.

Following the announcement, shares of RIL rose 11 percent on April 21, while those of Facebook gained 3 percent in after-hours trade.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd

Catch our entire coverage on the Facebook-Jio deal here.