Reliance CEO Mukesh Ambani is looking to build the next giant of global technology

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Facebook is spending $5.7 billion to capitalize on India's internet boom

JioPlatforms already has an app ecosystem: which offer everything from online shopping to video streaming, which serves 388 million people subscriber via the Reliance Jio mobile network in India.

Ambani “definitely [wants JioPlatforms] be more than just a telecommunication company. They want to be India’s next Google or Tencent, “said PitchBook analyst Wylie Fernyhough.

The “ultimate goal”, second Counterpoint Research analyst Tarun Pathak, is becoming everything for everyone Indian and build an indispensable platform for the country’s hundreds of millions of Internet customers.

Building a new type of tech giant

Under Ambani’s leadership, Reliance Industries has moved from an oil and energy company to a large conglomerate that includes retail stores, a mobile and broadband operator, digital platforms and more.

But to take his plans to the next level, Ambani needed a buy-in from Silicon Valley, hence his $ 5.7 billion partnership with Facebook and his global messaging service WhatsApp. When the deal was announced last month, the scope of his ambition was clear.

“This winning recipe will be extended to serve other key stakeholders in Indian society,” said Ambani. “Our kisans [small agricultural workers]. Our small and medium-sized enterprises. Our students and teachers. Our healthcare professionals “.

The agreement, which is still awaiting regulatory approval, indicated that Ambani and Facebook are trying to create “a sort of platform where you can do anything from mobile banking, to messaging, to social media, to basically everything integrated into a single platform, “according to Fernyhough. In other words, a version of Tencent’s popular WeChat service in China.

Unlike Tencent, however, JioPlatforms also has a huge mobile network that it can count on to build a customer base.

“We have seen e-commerce, content, the cloud, technology companies that replace traditional telecommunication systems,” said Pathak.

Has indicated Rakuten (RKUNF) Japan, an e-commerce company that is now working to build a 5G network, and the US mobile operators, who are becoming “content houses” with the increasing number of Americans cutting the cables. (CNN is owned by AT & T (T).)

“In the end, you can’t just sell data, right, there will be a lot more,” he said.

Facebook rejected the idea that it is helping Ambani build a “super app” by noting that the two companies will continue to operate separately in India with their services.

Under Ambani's leadership, Reliance Industries has grown from an oil company to a sprawling conglomerate that includes retail stores, a mobile operator, digital platforms and more.

Instead, the two companies are providing “enabling blocks for small businesses to connect online, which allows many other businesses to get by,” Ajit Mohan, vice president and chief executive officer of Facebook for India, told CNN Business.

But even that level of collaboration gives Ambani a great influence in India, allowing him to find new customers by offering online services and digital tools for which the Indians are clamoring.

Grocery store as a step towards domination

Online shopping is the primary goal of the partnership. The grocery store is 70% of the Indian retail market, according to Bernstein, and over 90% of the market is disorganized and driven by small neighborhood mom and pop shops, known as kirana stores in India. The overall retail market is expected to double, from $ 676 billion in 2018 to nearly $ 1.3 trillion by 2025, according to Bernstein.

The Indian online grocery market is small in comparison, worth about $ 3 billion this year, according to research firm Forrester. But the company said the number is growing rapidly as the pandemic is rapidly changing people’s shopping habits.

When JioMart was launched late last year, it set itself the goal of convincing 30 million small shops to do business on the platform.

The Covid-19 pandemic and subsequent blockade in India accelerated the need to get kirana online quickly. WhatsApp will be instrumental in making this happen, because over 400 million Indians already use it as the main messaging app and often send messages directly to companies to buy goods or ask for products and services.

JioMart and WhatsApp “will complicate life Amazon (AMZN) is (Walmart owned (WMT)) FlipKart. Because this block has shown one thing: that Amazon and FlipKart are not equipped to supply food in India in their current format, “said Satish Meena, an analyst at Forrester.
Flipkart closes and Amazon restricts orders to 1.3 billion Indians in lockdown

This was the experience of Sambit Mohanty, a 40-year-old sales and marketing executive.

Concerned about his elderly parents, Mohanty ordered essential items such as tea leaves and soup for them on Amazon. But the delivery lasted 10 days. In addition, he was unable to purchase toys for his daughter on Amazon because he stopped taking orders for non-essential items.

Now Mohanty has said he is going to local grocery stores, many of whom do business on WhatsApp.

“It only requires a government notice and Amazon … puts in [notice] online saying they won’t deliver, “he said.” But local kirana stores are always available. “

There are some disadvantages to relying on those stores: Kiranas can have difficulty keeping track of stocks, as many owners register their inventory by writing the articles in a book and deleting things when it is sold.

If JioMart can enrolling the millions of kiranas you want, organizing them and helping them keep track of their inventory, could be a turning point. Reliance also has the largest number of grocery stores in India, which could act as partner suppliers.

Pathak, of Counterpoint Research, said that it will be easier to convince mom and pop stores to join JioMart because WhatsApp is involved, so they have you won’t need to download and learn how to use another app.

Good for the bottom line of Ambani

The recent the madness of fundraising is much more than fueling India’s digital growth. Ambani also needs money to settle Reliance Industries’ ballooning debt.

Shortly after the announcement of the Facebook agreement, JioPlatforms revealed three other major investments: $ 750 million from Silver Lake, $ 1.5 billion from Vista and $ 870 million from General Atlantic.

India's Jio platforms earn $ 1.5 billion from Vista Equity, marking 3 major investments in 3 weeks

Overall, Ambani made about $ 9 billion in less than four weeks. Analysts say Ambani is under pressure to repay the debt, offset the sharp reductions it is experiencing in the oil and other sectors and demonstrate the value of the JioPlat platforms.

The billionaire said at a shareholders’ meeting last year that he wanted Reliance Industries to become a “zero net debt company” by March 2021. As of March 2020, Reliance had approximately $ 44 billion in debt on its books .

“Addiction also needs technology to move from an oil and commercial company to [a] software company, “said Meena of Forrester. The pandemic has severely affected the oil sector. Global oil demand has collapsed due to sharp falls in transportation, industrial and commercial activities.

There is probably more money coming from Ambani.

Investors see the potential “for the Indian version of WeChat and how many hundreds of billions of dollars it could be worth a day,” said Pitchbook’s Fernyhough. “Being able to enter the ground floor is something really interesting for many people.”

Last month, Reliance Industries said it is ahead of schedule and will reach its zero debt target later this year.

– Swati Gupta of CNN contributed to this report.

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