Jio Facebook Transaction

May 2020
SINGAPORE

---- This Document is prepared Exclusively for Dr. M (BK Modi) & His Leadership Team ----

Prepared By – Mayank Vishnoi

 Structure of Thoughts

• People Behind The Story

• Why Deal was important ?
• What is Jio Platforms
• Structure of Facebook Transaction
• Jio-Mart Whatsapp MoU
• Key Advantages for Both Players
• Other Investors who followed Facebook
• Valuation Math
• What drives the Value ?
• Is this a real Opportunity ?
• Why are Investors lining up ?
• Perspective

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People behind the Story
Mr Manoj Modi, CEO – Reliance Retail, (Director on Board of Multiple RIL & Jio Entities), based in Mumbai
Mr. Modi has been with the group since last 3 decades and and has led several of the initiatives of the Group in this period of time. He has
driven the overall corporate strategy for the Group and has been instrumental in formulation of strategy and policies, project planning &
implementation and commercial, financial and regulatory matters. Modi has been instrumental in the Group’s re-entry into the
telecommunications business through Jio Infocomm. He is a Chemical Engineer from the Institute of Chemical Technology, Mumbai. He
was a key negotiator in Facebook transaction along with Akash.

Mr Oomen Mathew, President - Network, Global Strategy and Service Development at RJio, (Director on Board of Multiple Jio Entities)
Mr. Oomen is based in US and he is serving a second stint with the group. An MS in Electrical and Telecommunications from Oklahama
State University, he too worked with Infocomm between 2002 and 2008. He also worked with Flag Telecom and with Sprint Nextel before
returning to Jio in 2011. He has over 25 years of experience and hands-on executive with the ability to strategically mash-up products and
technologies, including VR and AR, IOT, devices, applications, etc. using a cloud-based delivery model offering solutions across consumer
and enterprise. Mr. Oommen helped design a network where everything rides on data, even voice. Hence, voice consumers only use 10-
15% of the bandwidth, allowing Jio to utilize more of its network for data. He is
Mr. Kiran Mathew Thomas, President (Director on Board of Multiple Jio Entities), based in Mumbai, India
Mr. Thomas holds a Bachelor’s degree in Electronics Engineering from the Cochin University of Science and Technology, India, and holds an
MBA from the Graduate School of Business, Stanford University, USA. He joined Reliance Group in the year 1997 and was part of the
process automation group for Reliance Petroleum, during the start-up phase of Reliance’s Jamnagar refinery project. He was one of the
initial members of the Reliance Infocomm start-up team, the Reliance group’s venture in telecom. He was a member of a core team that
developed the initial business blueprint and plan for Reliance Retail. Prior to joining Reliance, he worked with Tata Unisys Limited, a
leading IT consulting firm. He is the key person for payment banks and education sector digital initiates in Jio.

Mr. Anshuman Thakur, Head - Strategy & Planning - R-Jio, based in Mumbai, India
Mr. Thakur has been an investment banker in the field of telecom and technology with Morgan Stanley, NM Rothchild and acted as a
financial consultant with Ernst & Young and Arthur Anderson during his career. He graduated in Economics from University of Delhi and
completed his MBA from IIM Ahmedabad. Thakur played a key role in two significant deals with Morgan Stanley (General Atlantic Partners
buying out the promoters’ stake in Hexaware Technologies for $260 million; and $3.5 billion merger of Tech Mahindra and Mahindra
Satyam). 3
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Why Jio Stake Sale is important for Reliance ?

Source : Company Investor Presentation in December 2019

Large Digital Platform Companies are typically debt free.

And Reliance has huge debt pile of 1.6 Lakh Cores (21 Billion)
Source : Company Financials
Transactions Amount (INR CR) USD Billion
Saudi Aramco to pick 20% Stake in Oil to Chemical Business Subsidiary 114,000 15.0
Rights Inssue of Equity Shares in RIL 53,125 7.0
Fuel Retailing JV with BP 7,000 0.9
Primary Investment by Facebook (A) 43,574 5.7
Primary Investments by Financial Investors-SL, KKR, GA, VEP (B) 35,112 4.6
Second Round in Jio Platforms (under discussions)
Total Hard Commitment 78,686 10.4
Source : Bloomberg & Media Reports Private & Confidential 4
What is Jio Platforms Limited

• Last year, Reliance said it plans to create a digital holding company for
the telecom business, apps and a few of related acquisitions.
• This company would largely be debt free, with only Rs 25,000 crore of
spectrum-related borrowings in its Telecom related Business.
• The restructuring was aimed at creating a digital ecosystem
comparable with global platforms such as Amazon, Tencent Holdings
Ltd. and Alibaba.
• A host of companies that Reliance invested in are part of Jio Platforms.
These include music streaming service JioSaavn, online education
platform Embibe, AI-powered virtual assistant Haptik.

Area of Business Invested In Invested Value (Rs. Crores)

Online Music JioSaavn 7560
Online Education Embibe 1361
AI Platform Haptik 756
Open architecture business models Radisys 567
Cloud-based, language-as-a-service (LaaS) platform Reverie 280
High-Performance Computing (HPC) software simulation services Sankhya Sutra Labs 216
Automotive AI Company Netradyne 181
Robotics and AI Company Asteria Aerospace 148
Online Tution Funtoot 82
SaaS-based platform for Govt. Welfare schemes and services EasyGov 68
Digital Healthcare Services Kare Expert 11
Online News NEWJ 6
AR/VR Platform Tesseract Not Disclosed
Total 11236

Source : Company Financials

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Structure of Facebook Transaction
The deal unites two huge pools of
Indian consumers, and their data. Jio Facebook Inc. pays $5.7 billion for 9.99% stake in Jio Platform
has ~388 Mill, Facebook has ~400 Mill
WhatsApp users & ~250-350 Mill
Facebook users.
In the post-corona world, a bunch of
our daily activities will be moving into
the digital world. The two can develop
a Super App that has a “Media” angle
to it, a “Commerce” angle to it and a
“Communication” angle to it. Deal
valued Jio Platforms at a valuation of
~USD 57 Billion.
JioMart-Whatsapp MoU targets to
reach 60 Million SME businesses, 30
million merchants/shop keepers and
120 million farmers, in addition to
empowering people seeking digital
services.
Tax Auditor : PWC
Lawyers : AZB and Davis Poke (Jio) &
Amarchand Mangaldas & Hogan Lovells (FB)
Investment Bankers : Morgan Stanley (Jio),
Bank of America Merrill Lynch (FB) Private & Confidential 6
JioMart - Facebook MoU

Indian Retail
Market is
expected to
be $60 Billion
in online
retail sales.

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Strategic Advantages

Positioning - It should Easy Navigation with Indian

help in positioning Jio as legal & Regulatory Systems -
a digital technology WhatsApp has been working
company rather than just with Indian Govt. since last 2
a Telco. Company is years to launch its payments
developing a digital service, but has faced a
ecosystem for customers number of hurdles related to
to cover each aspect of data localization & data
people’s life. security. With a local partner
like Reliance, these issues can
be better navigated.
Better Financial Footing -
Cash infusion will lead to Access to Indian Online Retail
reduction in overall debt WhatsApp will enable
levels. The deals will help onboarding of local
Reliance meet its goal of businesses on the JioMart
eliminating $21.4 billion platform.
in net debt by the end of
the year.

An integration with digital ecosystem can provide substantial competitive advantage for mobile biz such as lower churn, and better
value added services with higher revenue per user.

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Others Follow-on Investors

Date Total AUM Name Shareholding Amount Invested Total Jio Value - Silverlake Investments, Vista Equity Partners (VEP), General
2nd May 50 FB 9.99% 5.70 57 Atlantic Partners (GA) and KKR follow the lead of Facebook with
8th May 40 Silverlake 1.15% 0.75 65 some premium and takes the Overall investments into Jio
17th May 57 VEP 2.32% 1.50 65 Platform up to ~USD 10 Billion.
17th May 35 GA 1.34% 0.87 65
22nd May 148 KKR 2.32% 1.50 65 - After the latest sale, Reliance retains 83% of Jio Platforms and
facebook as well as other investors own 17%.
All Figures in USD Billions

Current Shareholding - Few other large institutional investors are expected to join soon
like Mobadala, PIF, CPPIB etc.

Henry Kravis, Co-Founder and Co-CEO of KKR, said, “Few companies have the potential to
transform a country’s digital ecosystem in the way that Jio Platforms is doing in India, and
FB potentially worldwide. Jio Platforms is a true homegrown next-generation technology
leader in India that is unmatched in its ability to deliver technology solutions and services
Silverlake to a country that is experiencing a digital revolution. We are investing behind Jio
Platforms’ impressive momentum, world-class innovation and strong leadership team,
VEP and we view this landmark investment as a strong indicator of KKR’s commitment to
supporting leading technology companies in India and Asia Pacific.”
GA

KKR

Reliance

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QUESTIONS IN EVERYBODY’s MIND

• Where does Reliance Jio Platform derive its value?

• Is this a real Opportunity ?

• Why are investors lining up ?

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Valuation Of Reliance Jio Platforms – Almost 50% in 10 Lakh Crore Market Cap of RIL
Details INR Cr USD Billion
Primary Investment by Facebook (A) 43,574 5.73
Primary Investments by Financial Investors-SL, KKR, GA, VEP (B) 35,112 4.62
Implied Equity Value of Jio Paltforms - Post last round of Stake Sale (C ) 494,000 65.00
Net Debt in Jio Platforms (D) 25,800 3.39
Post Transaction Enterprise Value of Jio Platforms (E=A+B+C+D) 598,486 78.75
Implied Value of Jio Telecom Business (F) 487,690 64.17
Implied Value of Jio Platforms Digital Ecosystem excluding TeleCo Biz (G=E-F) 110,796 14.58

Recent Transactions lead to an Implied Equity Value of USD 65 Billion

We deduce that ~INR 110,796Cr (USD 15 Billion) is the residual value

for Digital Ecosystem (excluding Telco Biz in Jio Platforms).

Promoters have recently invested INR 11,236 Cr. to develop the

capabilities during last 3/4 years and spent some more funds inhouse.

Thus, we believe that current value for Jio Platforms' Digital piece is
more of a Startup Valuation, where value primarily originates from the
high potential of future market share of the firm, rather than existing Average of FY2022 EBIDTA by Top Analysts in the Market 48769
operations and earnings. Multiple as per Suggested by next best Alternative Similar Business (Bharti Airtel) ~9x-10x
Implied value of Jio Telecom Business 487690

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Valuation Drivers – Where does Jio Platform derives its Value ?

VALUE = Opportunity + Perception

Source : Mckinsey Global Institute, Report : Digital India: Technology to transform a connected nation

We believe that Reliance Jio Platforms derives its premium valuation from :

1. Tremendously High Growth Prospects : R-Jio grabbed ~400 Million of overall ~1.2 Billion telecom users in India with in last 4 years. Telecom
industry consolidated from 13 to 3 only players in recent times, and probably soon it will convert into a duopoly (Bharti & R-Jio). The Company
also solved major bottlenecks for internet penetration a) High Speed Internet b) Geographical Coverage c) Affordable Smartphones (Jio Phones).

2. Strong Relations with Political Leadership in the Country : Reliance Group has always maneuvered its ways from difficult Indian Systems

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Is It a real Opportunity ?

Value Creation Over Known Human History

Future holds most of the value creation

from Artificial Intelligence (AI) &
Internet based Businesses

Source : Softbank Inc, Softbank Vision Fund

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Is this a real Opportunity ? Contd.

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Is this a real Opportunity ? Contd.
USA China

Falling data prices drove up usage, especially in India.

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Source : Mckinsey Global Institute Source : Mckinsey Global Institute
Is this a real Opportunity ? Contd.

• India’s digital consumer base is the second largest in the world and growing at the second-fastest rate amongst major economies.
India’s inclusive digital model is narrowing the digital divide within the country and bringing benefits of technology to all segments of
people.

• Half the potential economic value of $1 trillion in 2025 could come from new digital ecosystems in diverse sectors, including
financial services, agriculture, healthcare, logistics, jobs and skills market, e-governance and other areas.
Source : Ministry of Information & Technology, Government of India (Report - 2019) Private & Confidential 16
Is this a real Opportunity ?

Yes, Opportunity is REAL as data in
previous slides suggest that India is
going to be soon, one of the Largest
Digital Markets.
Mr. Ambani has said privately, that his vision for Jio Platforms is to create a Company
that encompasses a telecommunications firm like Verizon Communications, a service
like Google, a digital payments company like PayPal Holdings Inc. and a digital content
provider such as Netflix Inc.

Given R-Jio Platforms maintains or improves from its

current position (with numbers of end users) and it
builds more and more revenue streams.

The Company seems to be well poised to capture 10-

20% of $1 Trillion Indian Digital Economy Market size
with in next 4 to 5 years, catapulting Jio Digital
Ecosystem value to reach ~USD 100 Billion. (with even
10% capture of potential Economic value ).

We envisage and predict a US market listing event by

2025 or before to unlock this value. (and providing exit
to current investors)
Source : Ministry of Information & Technology, Government of India (Report - 2019)

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Why Investors are lining Up ? – 1. They have Seen it Before (Alibaba - CHINA)

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Why Investors are lining Up ? - They have Seen it Before (Tencent – CHINA)

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Why Investors are lining Up ? - They have Seen it Before (Amazon – USA)

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Why Investors are lining Up ? - They have Seen it Before (Rakuten - JAPAN)

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Why Investors are lining Up ? – 2. A Pandemic Proof Investment

• Demand for online services has exploded and the

infrastructure behind the internet has proved to be
admirably reliable.

• Facebook has said that messaging activity has

increased by 50% in those countries hit hard by the
virus. Amazon is planning to hire 100,000 new staff
to keep up with higher e-commerce orders.

• The big tech firms are also a bastion of financial

stability: together Alphabet, Amazon, Apple,
Facebook and Microsoft have $570bn of gross cash
on their balance-sheets.
Winners from the pandemic
• Shares in these firms have outperformed the
Source : The Economist, Jan 2020
market since late January.
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Why Investors are lining Up ? – 3. Record Pile Up of PE Funds to be deployed

• Private investors are sitting

on a record $1.45 trillion in
cash. That is the highest on
record and more than
double what it was five
years ago.

• Analysts say investors are

flooding to private equity
thanks to low interest rates,
hedge fund
underperformance, and
lower expected returns from
public markets.

• The flush of cash means

more competition for the
same deals, however,
pushing up valuations.
Source : Preqin, Global PE Information Repository Dry Powder = Leftover Committed Capital which is yet to be deployed by the fund
Some analysts think returns
will “disappoint.”

Private equity firms are sitting on a record $388 billion of dry powder in Asia. (As per News Agency Deal Street Asia)

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Perspective

Market Cap Users

Name Initial Avatar Now (USD Billion) (Millions) Listed@
Amazon Market Place Digital Ecosystem 1200 112* NYSE
Alibaba Market Place Digital Ecosystem 536 755 NYSE, HKEX
Tencent Messenger Digital Ecosystem 513 889 Nasdaq, HKEX
Rakuten Market Place Digital Ecosystem 14 111 JPX
Apple Device Maker Prospect : DE 1380 1400 NYSE
Facebook Social Media Prospect : DE 670 2500 NYSE
Source : Bloomberg, Company Websites *Only US Users

Looking at all the established Digital Ecosystems and a few prospects above.
Even if R-Jio can just onboard its existing 400 Mill customers in India, It can
very well achieve a substantial Value in the next 4/5 Years. Investors are sure
about R-Jio’s market potential, positioning as well as timing.

Given increasing tension between China and US and pressure on large

Chinese Tech giants to leave US (recent increased oversight bill). Capital
Markets in US will surely have space and expectations of someone like Jio
Platforms to join-in.

Thus, We may see Jio emerge as a key player to unlock the value in US
Capital markets by 2025. Same appears to be the key reason of current
rush to join the PE investment bandwagon of Jio. Reliance Jio Platforms Bandwagon

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 THANK YOU !

DISCLAIMER

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the important considerations that relate to recent transactions. Although we believe they are correct and not misleading, with every effort
having been made to ensure that they are free from error, they should not be taken to represent, nor are they intended to represent, advice
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