Vista Stake Caps $8 Billion Deal Run for Asia’s Richest Man

(Bloomberg) -- Billionaire Mukesh Ambani is a man on a mission: to dominate India’s consumer Internet market -- from online retail to digital payments.

He just sealed three deals in as many weeks to raise a combined $8 billion, including from Facebook Inc. Asia’s richest man isn’t done yet, as he races to transform the legacy oil-and-petrochemicals empire his late father built into a technology-driven, e-commerce force.

In the latest announcement Friday from his Reliance Industries Ltd., Vista Equity Partners agreed to pay $1.5 billion for a 2.3% stake in Jio Platforms, the conglomerate’s digital unit. Earlier this week, Menlo Park, California-based Silver Lake Partners said it would invest $753 million in the business, hot on the heels of Facebook’s decision in April to plow $5.7 billion for a 10% stake in Jio.

The flurry of transactions show the tycoon’s ambitions to pivot Reliance Industries into an Indian technology titan are going into hyperdrive. With investments from the likes of the social-networking giant and the two private-equity firms, Ambani, 63, is not only getting Silicon Valley’s backing for his plans, but is also raising funds to honor a pledge he made to investors in August -- to wipe out net debt at his group.

“Mukesh Ambani’s transformation plans for Reliance Industries tell us we can expect significant upside in the years to come,” said Chakri Lokapriya, managing director at TCG Asset Management. “He clearly understands that a technology company is valued much higher than the underlying commodity business of Reliance.”

The agreements also showcase the deal-making chops of the Mumbai-based company, when most of the world is in a lockdown to help contain the spread of Covid-19. As travel curbs stymied progress on the talks, trusted lieutenants of Ambani and Facebook Chief Executive Officer Mark Zuckerberg turned to video conferences and phone calls to wrap up the deal, people familiar with the matter said last month.

Jio Platforms’ turn as an an investor magnet is built on the potential of India’s digital market, both enterprise and consumer. Every business rooted in ancient practices and technologies is ripe for disruption -- be it the centuries-old kirana or mom-and-pop stores, its traditional education system or hospitals.

Impenetrable Market

On top of that, India is the only large open Internet market where foreign technology giants such as Amazon.com Inc., Walmart Inc and Google’s parent, Alphabet Inc. can fight for market share and dominance. Neighboring China, another huge market, is impenetrable for foreign technology companies.

Investors are enthused by the potential of Jio Platforms with its aspiration to upend not just online retail but also content streaming, digital payments, education and healthcare. It has even jumped into video conferencing via its JioMeet app.

“Reliance is the giant that can pull all this off,” said Sanchit Vir Gogia, founder and chief executive officer at technology and digital advisory, Greyhound Research. “It can marry its offline assets with its online properties for better monetization and multiple revenue streams. That excites investors who are seeing it as a hybrid opportunity.”

Cashless System

Facebook and India’s largest corporation both serve around 400 million users in the country, and they’ve made it clear the first order of business is establishing a cashless system to anchor forays into Internet commerce and mobile services. That alliance inserts a powerful new competitor into an arena already contested by Google, Walmart, Amazon and SoftBank Group Corp.-backed local outfit Paytm.

But none of them have the reach of Facebook’s WhatsApp, the nation’s most popular communications platform.

With its investment, Vista would become Jio Platforms’ largest investor after the parent and Facebook, Reliance said in a statement Friday.

“We are excited to leverage the professional expertise and multi-level support that Vista has been offering to its investments globally for the benefit of Jio,” Ambani said in the statement. Shares of Reliance Industries rallied 3.6% on Friday to cap the seventh week of gains, the longest winning streak since 2016.

Similar Deal

After the three rounds of stake sale, Jio Platforms -- which combines the might of the company’s wireless platform with some apps and ecosystems -- is now valued at about $65 billion. That’s about half the market value of parent Reliance.

Last week, the Mumbai-based company said it has received interest from other potential investors for a deal similar in size to Facebook’s.

Ambani’s pivot started in 2016, when he first dived into telecommunications. Reliance Jio Infocomm Ltd., his wireless carrier, is now India’s biggest with almost 400 million subscribers. Late last year, he unveiled JioMart, the online shopping portal meant to compete with the likes of Amazon in India. The site is still in pilot.

As Ambani, rolled out the wireless network spending almost $50 billion, his company also took on debt. He told shareholders in August that he cut net debt to zero by March 2021 by selling stakes, from about $20 billion as of March 2019.

On Course

The group said last week that talks with Saudi Arabian Oil Co. to sell an estimated $15 billion stake in its oil-and-chemicals business were still on course. The assurance came after the crude oil crash sparked by the pandemic spurred investor skepticism over the negotiations.

Furthermore, the company is also planning to raise about $7 billion selling shares to existing investors.

The string of deals, the ones to come and the rights issue may help Ambani achieve that goal ahead of time. Reliance told investors last week that it was on course to reach the target before the previously drawn schedule.

Reliance is “also ring-fencing the company’s net debt reduction goals in the event of a potential delay in selling its part stake of oil-to-chemicals business to Aramco, which may not be in a hurry to weave a deal when oil prices are trading low,” said Mayur Patel, a fund manager at IIFL Asset Management.

©2020 Bloomberg L.P.