The recent pairing of Indian conglomerate Reliance Industries with social media goliath Facebook has the potential to transform ecommerce in India.
Reliance is emerging from a rough patch, during which the much-heralded sale of 20% of its refining business to Saudi Aramco for $15 billion stalled. The sale was meant to help cut its debt. This need became more pressing when its share price plummeted by more than 40% between mid-February and mid-March. But on April 22, Reliance agreed to sell 9.9% of its Jio Platforms digital arm to Facebook for $5.7 billion. The deal will likely be a win for both companies.
Facebook will gain a new foothold in a market with immense potential: India is the world’s second-largest online market after China, with over 560 million internet users, according to Statista. This is despite an internet penetration rate of only about 50% in what is the second-most populous country in the world. Estimates project 650 million internet users by 2023.
One of the crown jewels of Jio Platforms is the mobile brand Reliance Jio. With over 388 million subscribers, Jio dominates the Indian mobile market. As research firm Research and Markets describes, “Jio jolted the mobile market from a standing start to becoming the largest mobile operator by subscriber and third-largest by revenue in just three years.”
Reliance is also one of India’s biggest retailers, with 11,300 stores in numerous segments spanning groceries, electronics and fashion. Combining this with Jio’s ubiquity in mobile telecoms, Reliance could compete with Amazon and Walmart-owned Flipkart. Meanwhile the new cash infusion from Facebook will enable Jio to outspend its rivals in 5G technology investments.
The deal could also give Reliance a partner for transforming Indian business, according to The Economist. Through WhatsApp, Facebook has built a large presence of its own in India, its biggest market with over 400 million WhatsApp users. Soon WhatsApp will also handle payments in India, and could become a major payment processor there. And, COVID-19 has made WhatsApp an ecommerce platform, used by quarantined Indians to order supplies.
Mukesh Ambani, Chairman, Managing Director and largest shareholder of Reliance, has a broader vision. He said that the combined efforts of WhatsApp and Jio would enable India’s 30 million small neighbourhood shops to become critical components of ecommerce, able to receive online orders and provide fast delivery.