- Three-year-Old telecom giant Reliance Jio has surpassed old players such as IT giant Infosys, India’s Largest Bank HDFC & FMCG Giant ITC in terms of Market Cap.
Reliance Jio has transformed the Indian telecommunications industry in the last three years, emerging as the largest telco both in terms of revenue and market cap. Jio, who started operations at the end of 2016, is now larger than HDFC, Infosys, ITC, and India’s largest bank-as the Facebook deal priced.
Facebook paid $5.7 billion (about 43,574 crores) for a 9.9 percent stake in Jio earlier today, valuing it at about 4,40,141 crore. This puts Reliance Jio’s valuation at 52 percent of its parent company, Reliance Industries as per the market capitalization today.
But not all of that. Jio, a three-year-old firm, is now larger than many old blue-chip giants including HDFC, Infosys, and ITC at its current valuation of about 4.4 lakh crore. In reality, it’s more than 2.5 times larger than the country’s largest bank, State Bank of India.
Jio will be the fifth-largest company by market capitalization on the BSE Sensex at its current valuation of .. 4.4 lakh crore. The explanation, it would appear, is that Mark Zuckerberg paid a premium for his Jio stake of 9.9 percent.
A day before the deal was signed, Deven Choksey, the managing director of KR Choksey Shares & Securities, told Business Insider that he priced Jio at a share of some 550 rupees. This was when RIL shares traded at approximately 1200 pieces each. Based on a market cap of about 7.8 lakh crore, according to Deven’s estimation, Jio will be worth about 3.4 lakh crore.
By contrast, Zuckerberg charged 33 percent more than Choksey’s price at around 4.4 lakh crore. The subsequent rebound in RIL’s shares shows it to some degree, for the first time since the lockout was announced it jumped by more than 9 percent to trade above some 1,300.
There could be few reasons why Zuckerberg is paying such amount for Jio.
Firstly, Zuckerberg’s company has struggled in India for the last three years to get WhatsApp Pay off the ground. That did not happen, partly due to concerns about privacy and partly due to complaints from local payment operators.
Second, the Dependence agreement gives Facebook the access it needs and that could go a long way. “All of these entrepreneurs need digital resources that they can use to find and connect with customers to expand their business with communities around the world in a lockdown,” Zuckerberg said in a post today.
The total market cap of Airtel is ~2.75 lakh crore, which is just over 60% of Jio’s valuation. It should be noted that earlier this year, Airtel too clinched a similar partnership with Google.
The collaboration will put small and medium-sized enterprises (SMB) online using G Software, according to their announcement in January. This may be in response to the collaboration between Jio-Microsoft which agreed to bring Office 365 and other resources to medium and small enterprises (MSMEs).
Jio has Microsoft and Facebook on its side, but Airtel has Google on its side. These relationships also represent a relationship on a global level since Microsoft and Facebook have partnered up through projects for years.
