Reliance Shares Soar After Facebook-Jio Deal

With Facebook, world’s largest social media company, investing $5.7 billion for a 9.99 per cent stake in Reliance Jio, one of the biggest telecom operators in the country with over 380 million subscribers, the deal seems to be a win-win for both companies giving them bit a big advantage in the Indian market. This means that Reliance Industries, Jio's parent company, would be in the spotlight in coming days with its shares already rising by almost 10 per cent, or Rs 121, in a single day on Wednesday.

According to Pranjal Kamra, CEO, Finology, the deal means that the Facebook has valued Reliance Jio at approximately Rs 4.4 lakh crore whereas Airtel’s market capitalisation currently stands at around Rs 2.7 lakh crore.

"This is a big plus for Reliance and its share price is likely to shoot up (and that has already started). Besides this, the huge amount of debt that was burdening Reliance’s balance sheet would be drastically reduced with this deal. So, more efficient operations are definitely on cards," he said.

He added that Facebook is probably not just trying to make some money out of this deal like a usual portfolio investment, but, looking to exploit huge long-term synergistic gains that might be much more valuable than we could even think of at the moment. 

"May be this partnership could be exercised in a way that if in future Facebook introduces paid features of WhatsApp, they could be free for Jio users and so on," he added.

On one hand, it gives Facebook a wider audience with Jio’s 388 million clients, it helps Reliance pay its debt as well as leverage the reach of Whatsapp, Facebook Chat’s service, says Aamar Deo Singh, Head Advisory, Angel Broking.

"With the current global scenario post COVID-19, focus being on digital, it opens up huge business opportunities for both of the giants. It couldn’t have  come at a more opportune time. And with India slated to have 900 million internet users in a few years, as per a CISCO report, limitless potential opens up. The rise in Reliance's share prices clearly indicate that markets have given a thumbs up to this business decision, as it paves the eventual listing of Jio which is in the process to transform itself into a digital services company. On the other hand, Facebook would also gain as it gives it access to huge digital business opportunities in India," he said.