Facebook bets big on India with $5.7 billion Reliance deal

Facebook is set to spend $5.7 billion to buy a 9.99% stake in Reliance Industries’ digital arm, as it capitalizes on WhatsApp’s extensive reach in the country.

The deal is Facebook’s biggest since its $22 billion buyout of WhatsApp in 2014 giving the firm a stake in Jio Platforms – the digital services entity that houses Reliance’s telecoms arm Jio Infocomm. The transaction is the eighth largest deal in Asia this year, according to Refinitiv data. 

To kick off the partnership, Facebook’s WhatsApp messenger, which counts India as its biggest market with about 400 million users, will help fuel the growth of Jio’s new retail venture, JioMart, the two companies said.

“In the near future JioMart and WhatsApp will empower nearly 30 million small Indian kirana (grocery) shops to digitally transact with every customer in their neighborhood,” Mukesh Ambani, Reliance chairman and Asia’s richest man, said in a video statement.

JioMart, the e-commerce venture of Reliance’s retail arm, offers customers free express grocery deliveries from neighborhood mum-and-pop stores. It is yet to be launched across India, and is likely to pose a formidable challenge to Amazon.com’s local unit and Walmart’s Flipkart.

For Reliance, the deal will help the oil-to-retail group, which bet over $30 billion on the Jio telecoms venture, reduce its debt load.

The investment, according to tech and retail analysts, will give Facebook different avenues to expand in India, its biggest market outside of the United States.

“The alliance with Jio, which has over 380 million subscribers, could also help WhatsApp evolve into an Indian version of Chinese internet giant Tencent’s WeChat, which allows users to chat, make payments and book flights and hotels”, a source with direct knowledge of the deal said.

“The idea is to turn the Facebook, WhatsApp and Instagram ecosystem into something like that. What Facebook don’t want to do is go out and deal with the physical task of building warehouses, keeping inventory. They don’t want to be a Walmart or an Amazon,” the source added, declining to be identified as details of the deal were private.

“They (Reliance) have great ambition. As they try to build a retail business on top of the core Jio base, this deal provides them with a mechanism for not having to go through a hit and trial method, but leverage some technologies that are proven,” said Atul Kunwar, a former Chief Technology officer at one of India’s biggest IT firms, Tech Mahindra.