Reliance Industries, India’s largest company in terms of market capitalization, on Friday, said Intel Capital has invested USD 253.6 million in its digital arm Jio Platforms for a stake of 0.39%.
This essentially means the investment arm of the American technology behemoth Intel, has become the 11th investors to come on Jio Platforms’ cap table, barely two weeks after Mukesh Ambani, chairman and managing director of Reliance Industries said, the current phase of induction of financial partners in the digital venture has ended.
Between late April and mid-June, Reliance raised USD 15.17 billion (INR 115,693.95 crore) from leading global investors including Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, Abu Dhabi Investment Authority (ADIA), TPG, L Catterton, and Public Investment Fund (PIF).
On June 19, Ambani said Reliance has become net debt-free after raising a total of USD 22.1 billion (INR 168,818 crore) in the last 58 days through funding from global investors and rights issue. The group was reeling under USD 21.4 billion net debt (as of March 2020) that it had accumulated over the years, a significant part of which came from its splurge on dirt-cheap internet services.
With the Intel Capital funding, Reliance said, Jio Platforms has now raised USD 15.7 billion by diluting 25.09% equity in the entity. The latest transaction values Jio Platforms at an equity value of USD 66 billion and an enterprise value of USD 69 billion.
The deal is interesting because Intel Capital is the second technology firm after Facebook in the entire gamut of high-profile global investors who have backed Jio Platforms in the last two months.
“We are…excited to work together with Intel to advance India’s capabilities in cutting-edge technologies that will empower all sectors of our economy and improve the quality of life of 1.3 billion Indians,” Ambani said in a statement.
Intel, which has offerings across semiconductors, computing and communications technology devices, data centers, and cloud, said it is excited to “help fuel digital transformation in India, where Intel maintains an important presence.”
Intel has been present in India for over two decades and runs state-of-the-art design facilities in Bengaluru and Hyderabad. Intel Capital, which backs startups working in the space of artificial intelligence, autonomous vehicles, datacenter and cloud, 5G, next-generation compute, has invested USD 12.9 billion in more than 1,500 companies worldwide since 1991. Out of these, its 692 portfolio companies have either gone public or participated in a merger.
According to Wendell Brooks, Intel Capital President, Jio Platforms’ focus on “applying its impressive engineering capabilities to bring the power of low-cost digital services to India,” aligns with Intel’s purpose of delivering breakthrough technology.
Jio Platforms is an umbrella entity that houses all of Reliance’s telecom and digital assets–Jio Infocomm and its digital platforms like MyJio, JioTV, JioCinema, JioNews, and JioSaavn. It also received the company’s tech capabilities like artificial intelligence, big data, and Internet of Things (IoT). Additionally, it subsumed the oil-to-retail conglomerate’s tech acquisitions and investments such as Haptik, KaiOS, Reverie, Radisys, Den Networks, Hathway Cable, and Datacom Ltd, among others. Betting big on this venture, Reliance has been able to sell its vision of creating a digital India to 1.3 billion Indians, primarily focusing on millions of small merchants, micro-businesses, and farmers.
“Intel’s deep expertise across edge ecosystem, computing devices, and enterprise data center solutions can help Jio Platforms expedite on its ‘Compute To Cloud’ vision,” Sanchit Vir Gogia, the chief analyst, founder and CEO of Greyhound Research, said in a recent analyst note.
There is another segment where Jio can tap Intel’s resources. It is no secret that Jio harbors the ambition to play a bigger role in creating smart cities across India, which is one of the flagship initiative of the Indian government. Reliance has already launched its IoT cameras for homes, which aligns with the smart city vision. With Intel, which has RealSense technologies that use AI to offer vision‑based solutions, Gogia said, Jio can go enhance its portfolio of IoT devices.
Moreover, Gogia added, Intel can also help Jio foray into computing devices (laptops and tablets), just as Ambani had ventured into entry-level smartphones with its telecom arm, Jio Infocomm. On its part, Intel, which has been eyeing India’s digital transformation to expand its footprint deeper into the country, Jio Platform is one rare opportunity.
Since Jio Platforms is expected to roll out data centers for enterprise services, Gogia said, this investment will ensure Intel’s technology can be leveraged for the same. Without this investment, Gogia believes, Intel won’t have a fair and equal shot at Jio’s foray in Cloud, given that Intel’s archrival AMD is a portfolio company of Mubadala, which wrote Jio a USD 1.2 billion check for a 1.85% stake.
Gogia believes Reliance can potentially divest another 4-5% in Jio Platforms to raise additional money in the range of USD 2.6 billion to USD 3.3 billion.
A report that was released last month by Bernstein Research said, it expects Jio Platforms to reach 500 million customers by 2023, and control 48% of the mobile subscriber market by 2025.
Parallelly, Reliance reportedly is in the final stages of acquiring stakes in some units of Future Group, an Indian retail conglomerate.
The deal will involve at least three companies promoted by Future Group’s founder Kishore Biyani—Future Retail, Future Lifestyle Fashions, and Future Supply Chain Solutions—going for a merger, according to a report by local media Economic Times (ET). The combined business will then be acquired by Ambani’s Reliance, it added.
It is to be noted that Amazon holds a 3.58% stake in Future Retail, the owner of supermarket chains Big Bazaar, HyperCity, and grocery chain Easyday. While the move will help Biyani pay off the company’s debt, it will make Reliance the biggest brick-and-mortar player across categories like groceries, fashion, and general merchandise.