India continues to attract investment from U.S. tech and e-commerce firms. In 2018, Walmart [NYSE: WMT] acquired India’s biggest domestic e-commerce firm, Flipkart. Amazon [NASDAQ: AMZN] has said that it is investing $5 billion in India. Now two U.S. entities — Facebook [NASDAQ: FB] and Silver Lake, a private equity firm — have taken stakes in Jio Platforms, the telecom and tech arm of India’s big conglomerate, Reliance Industries. Jio needs the cash, as it is in the midst of an effort to undercut other Indian telecom incumbents and bring a huge swath of India’s unconnected population online via cheap devices and cheap internet access. Silver Lake’s stake is $750 million; FB’s $5.7 billion stake is the company’s largest external purchase since the acquisition of WhatsApp.
The Indian consumer is an attractive target audience, and FB certainly hopes that its previously troubled efforts to reach that consumer will be bolstered by the relationship with Jio. In 2016 Indian regulators put the kibosh on FB’s homegrown efforts to roll out a FB-centric internet access solution in the subcontinent. They have also prevented FB from expanding WhatsApp’s payments functionality in India.
Clearly, this last is one of FB’s main points of focus. FB’s efforts to create a digital stablecoin are ongoing; the company has revamped its model for Libra to tie the tokens to different local currencies rather than to a basket of global currencies, as was the original plan. The company is clearly focused on turning WhatsApp into an e-commerce and payments platform, Chinese mobile payments systems such as WeChat and Alipay likely provide a model of what FB would like to accomplish outside China, and particularly in the relatively untapped and promising Indian market. WhatsApp is core to that effort, and will evolve beyond simple communications into a commerce and payments platform, if FB’s plans move forward.
Investment implications: FB’s stake in Jio Platforms is forward thinking. The potential Indian e-commerce market is large and promising. We expect other U.S. firms to follow suit, and to see India emerge as an area of concentration for global consumer-facing tech and e-commerce. Please note that principals of Guild Investment Management, Inc. (“Guild”) and/or Guild’s clients may at any time own any of the stocks mentioned in this article, and may sell them at any time. In addition, for investment advisory clients of Guild, please check with Guild prior to taking positions in any of the companies mentioned in this article, since Guild may not believe that particular stock is right for the client, either because Guild has already taken a position in that stock for the client or for other reasons.
