NEW DELHI: Reliance Jio, the Mukesh Ambani-promoted company, is scouting for more investments following two transactions in April as it seeks to create a comprehensive ecosystem of digital products and services around its core telecom service.
The unit of the Rs 6.11 lakh crore Reliance Industries (RIL) wants to invest in or acquire ventures operating in the content, healthcare, education technology, financial technology and transportation segments, according to people ET spoke with.
Jio may also consider scooping up product technology ventures, particularly those operating in the still-nascent artificial intelligence and machine learning spaces, they said. “Jio made its core telecom offerings—voice, data and text—extremely commoditised and affordable,” said Jayanth Kolla, partner at telecom and technology-focused consulting firm Convergence Catalyst. “From a business model and revenue-generation point of view, it makes absolute sense for the company to evolve into a digital services player, and an ecosystem builder and leader. They’re putting all the pieces in play.”
A Reliance Jio spokesperson declined to comment citing the company’s mandatory quiet period prior to announcing its earnings.
In April, Jio announced a $124-million investment in Saavn at a pre-money valuation of $177 million, a 40-50% discount to the music streaming service’s estimated worth when it raised $100 million in 2015. It also committed to invest the rupee equivalent of $180 million over three years in AI-based education platform Embibe.
The emergence of Jio as a potential buyer of or investor in startups has come as welcome news for India’s venture capital industry, which has found it hard to record investment exits, particularly through the M&A route.
“Given Jio’s intentions, a number of Indian startups will no longer have to depend on just venture capital or large conglomerates such as Google, SoftBank or Alibaba (for funds). This, in turn, will accelerate exits,” a venture capital investor told ET on condition of anonymity as he had negotiated with Jio on behalf of a content producing startup earlier.
Leading Jio’s charge into the startup ecosystem is Akash Ambani, the 27-year-old Brown University-educated older son of Mukesh Ambani. Akash Ambani, chief of strategy at the company, is believed to be deeply involved in the negotiations. “He was very involved during the Embibe transaction… It’s not a surprise because we had been hearing about his active participation in operational decisions. He is still learning the ropes but has been putting his imprint for about a year now,” said a lawyer who has worked on a deal involving Jio.
The increased scrutiny on the country’s newest telecom operator comes after it announced two quick acquisitions—music streaming service Saavn and online test preparation startup Embibe—last month. However, given the structure of both transactions, no one expects Jio, run by among the most hard-nosed negotiators in the country, to break the bank while acquiring assets. “If you look at the Saavn announcement, it’s a slump sale of sorts,” the lawyer said.
All acquisitions and investments by Jio will be done through RIL in the short-term, industry experts said, given expectations that the parent entity will look to list Jio in a few years and, therefore, try and ensure that its balance sheet starts off on a clean slate. Jio’s ambitious bid bears resemblance to US telecommunications giant Verizon Communication’s $4.48-billion takeover of Yahoo’s operating assets last year, and combining it with AOL, which Verizon bought for $4.4 billion in 2015.
That deal, which saw the wireless major set up a new subsidiary called Oath with an estimated 50 media brands, was designed to take on technology behemoths Google and Facebook in the online digital advertising space.
But it’s not clear if that strategy has worked out yet as it has just been one year since the transaction was closed.
Industry experts believe Jio will pursue a similar strategy, delivering content and products across its mobile platform while attracting customers with its cut-price data and voice services.
“(Jio’s) proposition has always been about bringing an aspect of a digital ecosystem, and rather than making money from the core access it will provide, the strategy is to make money from a suite of services that it can build on top of the access over a period of time,” said Neeraj Roy, CEO of digital and mobile entertainment company Hungama Digital Media.