Home Business Facebook bets on a different sort of e-commerce in India

Facebook bets on a different sort of e-commerce in India

by admin2 admin2
16 views
facebook-bets-on-a-different-sort-of-e-commerce-in-india

The deal also helps a struggling conglomerate


RUMOURS OF INDIA’S debt-sodden firms receiving a cash infusion from a foreign buyer swirl regularly, but rarely become reality. With the country in lockdown and oil prices crashing, worries have grown that the most touted such investment—the $15bn purchase of 20% of Reliance Industries’ refining arm by Saudi Aramco, the kingdom’s oil colossus—may be delayed or cancelled. That deal had been seen as a way to ease the pressure from loans used to build Reliance’s Jio telecoms arm: concerns that it was under strain certainly did not help as Reliance’s share price tumbled by more than 40% between mid-February and mid-March amid pandemic panic. But all is not lost for the Indian conglomerate—thanks to Mark Zuckerberg.

On April 22nd Facebook agreed to buy 9.9% of Jio for $5.7bn. With the swipe of a pen, Reliance has a new financial cushion and, possibly, a partner for transforming Indian business. For Mr Zuckerberg’s social network, the bet is one-tenth of its rapidly expanding pool of cash, placed on an intriguing market.

The deal’s value lies in the crossover between the hold each partner has on aspects of India. Since its launch in 2016 Jio has crushed domestic competition in mobile telecoms with ultra-low prices. With 388m users, and funds from Facebook, it is much better placed than rivals to invest in 5G technology.

Reliance also controls a vast retail empire, with 11,300 stores from groceries to electronics and fashion, including joint ventures with well-known foreign brands. So far, margins have been thin, but the individual components are seen as pieces in an incomplete platform that, with Jio, could compete with Amazon and Flipkart (owned by Walmart).

In a quieter way, Facebook has built a formidable presence in India through WhatsApp, which has over 400m users there (and has helped link locked-down Indians to food supplies). In February, after a long struggle, tentative approval was granted for WhatsApp to handle payments in India. If unfettered by bureaucratic hurdles, it is expected quickly to become among the largest payment-processors in the country, with all the data that comes with it.

The combined efforts of WhatsApp and Jio, said Reliance’s boss, Mukesh Ambani, would enable India’s 30m Kirana stores (small neighbourhood shops) to become critical components of e-commerce, able to receive orders and offer quick delivery—in contrast to the online-shopping business model that has made many local shops elsewhere in the world obsolete. It may be the deal’s biggest selling point.

This article appeared in the Business section of the print edition under the headline “Jiostrategic”

You may also like

Leave a Comment