The social media giant Facebook is set to acquire 9.99% stakes in Jio Platforms Ltd through its business entity Jaadhu Holdings LLC. This new partnership will make Facebook the largest minority shareholder in Jio stakes. The $5.7 billion deal which roughly amounts to 4.62 lakh crore Indian rupees will accelerate the launch of its new commerce business - Jio Mart.
The deal comes after the government approves of WhatsApp digital payment services which will compete with other digital payment giants like Google Pay & Paytm in the Indian market in the coming future. The arrangement among Jio Mart and Facebook-owned WhatsApp will allow users to shop groceries online by providing them access to their nearby Kirana stores.
The deal also offers Reliance much-needed funds after its debt stock rose to over $40 billion in September 2019. The Facebook investment significantly contributes to Mr. Ambani’s mission to make Raliance a zero-net debt company.
Mr. Ambani said this deal will empower the local and small business owners of India.
The WhatsApp & JioMart partnership will make the local shopping process a whole lot easier and faster for the people. Now people can shop with their nearby Kirana store sitting at home. This kind of digitalization will also help in boosting the businesses of local retailers.
Facebook CEO, Mark Zuckerberg expressed his views on the deal publicly through a blog post.
This deal will support local Indian businesses as in today’s challenging time many local businesses are facing major setbacks. This collaboration with these businesses will help them grow in the digital landscape.
He said that Facebook will play a significant role in the Major digital transformation of India and the company is committed to widening business opportunities throughout the country.
It is estimated that this deal will impact the Indian economy radically as it has huge implications on India’s retail market. The local Kirana store merchant will now be able to list their products online and sell them with home delivery services. Several business owners are already using WhatsApp to promote their products and services, accept orders, and get feedback from its customers but this partnership will now provide them the platform to also sell online using WhatsApp. WhatsApp has nearly 400 million user base in India which makes this partnership quite significant for the local retailers as well as the consumers.
The deal has come out at a strategic time when the digital payment service market is on a rapid rise in the wake of the ongoing coronavirus pandemic. Both companies have their digital payment app namely Jio Money & WhatsApp Pay which can together dominate the market shortly. The deal also provides Jio Mart adequate opportunities to compete against e-commerce giants Amazon and Walmart (Flipkart).
By combining their strength - Reliance’s widespread distribution network and retail infrastructure and Facebook’s robust technologies both companies can dominate the Indian retail market by partnering with local Kirana owners. Unfortunately, the deal has come at a time when India does not have a firm Personal Data Protection policy in place. Moreover, this partnership can likely attack net neutrality by establishing a monopoly over this market segment soon.
So, will the deal help the local businesses or destroy them with their monopoly? - only time will reveal.