Saudi Arabian Wealth Fund Invests $1.5 Billion In Jio Platforms, India’s Top Mobile Operator

Saudi Arabia’s sovereign wealth fund, the Public Investment Fund of Saudi Arabia, will invest $1.5 billion in Jio Platforms Ltd., the telecommunications and digital services subsidiary of Indian conglomerate Reliance Industries Ltd.

Jio Platforms owns Jio, India's largest mobile network operator.

As a result of its investment, the Public Investment Fund will hold a 2.32% stake in Jio Platforms.

Public Investment Fund is one of the world’s largest sovereign wealth funds, with assets of about $320 billion.

Jio Platforms, which is controlled by billionaire Mukesh Ambani, the chairman of Reliance, has now raised a total of $15.2 billion in investments since April. (For the sake of comparison, India’s entire startup sector raised $14.5 billion last year).

Public Investment Fund becomes the eleventh investor in the mobile company, which has attracted deep-pocketed foreign investors, including Facebook (FB), private equity firms KKR & Co. and Silver Lake Partners, and the Abu Dhabi Investment Authority (another sovereign wealth fund), among others.

All told, these investors now hold a 24.7% stake in Jio Platforms, with Facebook owning 9.99%.

Jio Platforms is nearing 400 million subscribers, well ahead of Vodafone Idea and Bharti Airtel, each of which have about 300 million customers. Jio Platforms has skyrocketed to the top of the Indian mobile phone market by offering cut-rate voice calls and other cheap services.

The success of the mobile phone business is boosting Ambani’s strategy of diversifying away from Reliance’s core oil refining and petrochemicals businesses.

“We at Reliance have enjoyed a long and fruitful relationship with the Kingdom of Saudi Arabia for many decades,” Ambani said on Thursday. “From [the] oil economy, this relationship is now moving to strengthen India’s new… data-driven economy.”

Yasir Al-Rumayyan, governor of Public Investment Fund, stated: “We are delighted to be investing in an innovative business which is at the forefront of the transformation of the technology sector in India. We believe that the potential of the Indian digital economy is very exciting and that Jio Platforms provides us with an excellent opportunity to gain access to that growth. This investment will also enable us to generate significant long-term commercial returns for the benefit of Saudi Arabia’s economy and our country’s citizens, in line with our mandate to safeguard and grow the national wealth of the kingdom.”

Analysts at Bernstein said on Wednesday that Jio Platform will have more than 500 million subscribers by 2025 and control 48% of the Indian telecom market.

“At our last model update in December, we proclaimed [Jio Platform] the new king of Indian telecommunications. Since then, we have seen a multitude of international investors reach the same conclusion,” the Bernstein analysts said. “While we expect strategic cooperation between Facebook and other parts of the Reliance Group, we believe most of the other investments are passive. Reliance gets access to much needed capital to assist in paying down debt, and these investors get early access to the leading telco platform in India.”

Bernstein also expects Jio Platform to conduct an initial public offering within the next few years when its market share in India nears 50%.

“By then [average revenue per user] will have improved and we expect service revenue will double over the next three years,” the Bernstein analysts added.

Pankaj Jain, a prominent angel investor, told TechCrunch that Jio Platforms may have attracted foreign investors due to its suite of digital services products.

“Foreign investors see that owning the pipes is a race to the bottom in terms of [average revenue per user], but having so many bundled services seems like it’s the future for telecommunications companies,” he said. “By solidifying their content strategy, they have appealed to investors that are seeing this same strategy play out in other markets. Unfortunately, it’s still to be seen whether content can help increase margins significantly in India.”

On Friday, Ambani said that Reliance became free of net debt after raising more than $22 billion in a rights issue and through the sale of stakes in Jio Platform.

“I have fulfilled my promise to the shareholders by making Reliance net debt-free much before our original schedule of [Mar. 31] 2021,” he said. “I wish to assure [shareholders] that Reliance in its golden decade will set even more ambitious growth goals and achieve them.”