Reliance Industries share price jumps 10% after Facebook-Jio deal, hits upper circuit

Reliance Industries Ltd., helped by the mega Facebook-Jio deal saw its share price jump 10% to touch the upper circuit at Rs 1,359 per share on Wednesday. The scrip has maintained its position as the top gainer on S&P BSE Sensex since the opening bell today. The first big cross-border deal of this year will see Mark Zuckerberg’s Facebook pick a 9.99% equity stake in Mukesh Ambani’s Reliance Jio for Rs 43,574 crore. “It’s a win-win situation for both the partners, as on one hand, it gives Facebook a wider audience with Jio’s 388 million clients, it helps Reliance pay its debt as well as leverage the reach of Whatsapp, Facebook Chat’s service. And with the current global scenario post-COVID-19, focus being on digital, it opens up huge business opportunities for both of the giants,” said Aamar Deo Singh, Head Advisory, Angel Broking.

The less than four-year-old telecommunications arm of Reliance Industries has been valued at Rs 4.6 lakh crore by Facebook, putting it just behind the four largest public listed companies in India, in terms of market capitalization. In very little time span, Jio has garnered the support of about 40 crore customers, said DART Research. “However, this also led to investments of $45bn+ and debt of ~$30bn for Jio (pre-InvIT). The investments by Facebook, Brookfield in Tower InvIT (yet to be closed) and potential investments in Fiber InvIT would significantly strengthen the balance sheet of RIL and is a key positive. This will enable Jio to continue to compete aggressively besides investing in futuristic technological advancements,” the research firm said.

The deal with Facebook will help Reliance grab a larger wallet share of consumers from various sectors, including retail, payments, and telecom. “Reliance is already up almost 7% in today’s day of trade, clearly indicating that markets have given a thumbs up to this business decision, as it paves the eventual listing of Jio which is in the process to transform itself into a digital services company. On the other hand, Facebook would also gain as it gives it access to huge digital business opportunities in India,” Singh said earlier in the day before RIL was locked in the upper circuit.

The deal could also shape up to be a positive for competitors like Bharti Airtel and Vodafone Idea (VIL), said DART Research. “Premium valuations and massive investments in Jio is sentimentally positive for Bharti and VIL for future investments by other players if any. However, the financial and technological competitiveness of Jio increases significantly with Facebook investments for peers to catch-up and thus negative from a medium-term perspective. Jio is taking leap whereas others are taking a step.”

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