Reliance Jio-Silver Lake Deal | A sign of global confidence in India’s digital economy

Jayanth Kolla

Silver Lake Partners’ — one of the biggest private equity firms — investment of $750 million in Reliance Industries’ Jio Platforms is a sign of global technology investors’ confidence on the Indian digital ecosystem and its growth potential.

The fact that Reliance has managed to garner a second tranche of equity investment within 10 days of Facebook’s $5.7 billion round, that too at a 12.5 percent premium, is an indication of company’s growth prospects, readiness and trajectory. With the Silver Lake investment, Jio Platform’s valuation of $65.95 billion, forms 53 percent of the total Reliance Industries’ valuation of $121 billion. Clearly, Jio is evolving into a significant player within the group.

For Silver Lake, this investment and deal is beneficial in three key areas.

First, India is one of the biggest and fastest growing digital and Internet economies in the world, and with a significant headroom for growth. In the last couple of years, this market has witnessed several Chinese companies and their products enter and grow exponentially. Beyond communication, services such as media consumption, creation, digital commerce, gaming, productivity, etc., have only recently been introduced to mass market consumers in India.

With this infusion, Silver Lake manages to invest in a growing market right at the inflection point of its digital economy take-off. Also in its a leading player, who is not only well versed, but is also fast getting well-equipped to evolve into an end-to-end digital company catering to India at mass market scale.

Second, with garnering over 370 million 4G mobile subscribers in three-and-a-half years, after launching the mobile services business as a challenger (as the market already had a billion-plus subscribers), Reliance Jio has proven its significant brand building, distribution and operations prowess. This makes the company a valuable partner and bet from Silver Lake’s point of view.

Investments, especially private investments, into technology companies in India, in the recent years, have focused on the operational capabilities and execution mindset of the founding teams, instead of on the technology innovation(s). Almost all the heavily-capitalised technology startups in India are ‘India versions’ of global companies, with significant operations ramp up, and are seldom technology innovators or IP (Intellectual Property) builders. From this standpoint, the Jio Platforms has already proven its growth capabilities.

Third, for any foreign company or investor focused on India, the need to be on the right side of policy is a big part of their success in this country. In recent years, Reliance Jio has been careful enough to take all the right decisions in this space.

For Reliance Jio, garnering investments to the tune of $6.5 billion from two of the biggest players in their respective fields, in a pandemic-struck, chaotic economic environment is a significant achievement. This will help the Reliance group to provide confidence to its existing shareholders on its ability to attract global players, along with growth potential. This could also pave way for other global investors to view the Indian market and players favourably, despite the economic slump.

One of the biggest technology-focused PE firms with a strong portfolio which includes players such as Twitter, AirBnB, Alibaba, Dell Technologies, ANT Financials, Expedia, Waymo, etc., is a great partner for Reliance Jio. It can learn from the biggest and best from around the world. From technology innovations, platforms, products, solutions, digital consumer behaviour and key learnings from around the world, both the Facebook and Silver Lake partnerships are significantly beneficial for the company.

For both the players, a huge potential is in figuring out ‘Data Monetisation’. Globally, it is still early days of monetising data. Nobody has yet cracked a model for end-to-end value generation and capitalisation of data and its myriad forms and offerings. India, the biggest and fastest growing smartphone and Internet economies, is the right and ripe playground for experimenting multiple techno-commercial offerings and pick the best that suits the needs and ambitions of both the players. This partnership could also be a first step in that direction.

Jayanth Kolla is Partner, Convergence Catalyst. Views are personal.