Between April 22 and June 7, a period of seven weeks when the world was being convulsed by an epochal pandemic, an Indian company heralded the epochal transformation of the country’s innovation economy. Yes, the frenzy of funding announcements by Jio Platforms is as big as that, perhaps much bigger. The eight deals, which total Rs 97,885.65 crore (about $13 billion) and value Jio Platforms at Rs 5.16 lakh-crore (nearly $69 billion), could not have come at a better time for India.
The national mood, quite understandably, is one of apprehension, although there is enormous resolve. We have come together to fight the COVID-19 pandemic, which originated in China, but businesses are only just beginning to get back on their feet. The Chinese have provoked a standoff on the border, causing a needless distraction of national attention. India badly needed a mood-lifter and got one from Jio.
Jio Platforms, which houses India’s largest telecom operator Jio and other digital businesses, is a tale of the triumph of chutzpah. When the rest of the world has been cowering, frantic about survival, Jio has put together one of the largest technology funding deals in history. From Facebook and Silver Lake to Vista and KKR, it has assembled a roster of investors who are the envy of the unicorns of the world. Remember, three deals adding up to nearly Rs 20,000 crore were announced after rating agency Moody’s downgraded India’s sovereign rating. There is no direct connection, true, but what better vote of confidence can there be in Jio and in India?
Massive deal-making in the time of a pandemic is also a testament to the top-level bandwidth at Reliance. Jio Platforms is an important part of Reliance Industries, but there are also other massive businesses, including oil, petrochemicals and retail. Then there is the rights issue. Talk about walking and chewing gum at the same time!
Self-belief was a founding motto of Jio, which launched mobile services only in December 2015, in a market of entrenched incumbents. It is one of the world’s youngest unicorns, with a DNA all its own. It styled itself a digital platform, and not just a telecom service provider. Jio, whose parent Reliance is known for its prodigious execution capabilities, is the startup India desperately needs — a money-spinner which is a combination of innovation and implementation, not namby-pambies with paper valuation.
Inevitably, in the coming weeks and months, startups in India and around the world will have to face up to the reality of the post-COVID-19 world. In most cases, valuations will fall dramatically. Startups, which promised to transform the world, will first have to transform themselves. Many a unicorn will end up being worth less than popcorn.
Jio, which has converted adversity into opportunity, could have just created the defining moment for India’s startup and technology innovation ecosystem. It is an example of what is possible in India, and also of the virtue of flawless execution. The biggest funding moment in Indian history could well be a historic turning point for Indian startups.
When Alibaba made it big, there was a massive explosion in China’s startup and innovation economy. We will see this repeated in India — Jio will be a force-multiplier of gargantuan proportions for Indian startups. It will provide the ideas, energy and funding to reinvent startup activity in India. Bharat Startup 2.0 will be an important legacy of Jio.
What next for Jio? This is obviously just the beginning for Jio and India’s digital and innovation economy. As a platform, Jio is present across vital and lucrative areas — commerce, payments, finance, entertainment and gaming, education, healthcare and much more. In terms of valuation, it is certain that Facebook and the seven other investors as well as other stakeholders in Jio should count themselves lucky.
To understand the potential valuation of Jio Platforms in the event of an overseas listing, the case of China’s Ant Financial, an Alibaba affiliate, could provide a pointer. In the quarter ended September 2019, it contributed $309 million to Alibaba as a 37.5 percent share of its pre-tax profit towards royalty and software technology services fees. That would give Ant Financial a pre-tax profit $824 million in the September quarter. Ant was estimated to be valued at $200 billion in a recent private share sale.
For the most recent quarter (March 2020), Jio’s (the telecom business alone) pre-tax profit was Rs 6,200 crore, or $826 million (assuming an exchange rate of Rs 75 to a dollar). As you can see, Jio and Ant Financial are evenly matched on profitability — and Jio a platform player with massive growth potential across a range of businesses. This is only illustrative, but you get the idea.
Alibaba, China’s startup icon, is listed on the New York Stock Exchange and is valued at $1.18 trillion. There is no reason why India’s startup icon should not be our first trillion-dollar company.Disclaimer: Reliance Industries Ltd., which also owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.