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By Nivedita Bhattacharjee and Bhargav Acharya
BENGALURU (Reuters) – Facebook (O ? will spend $ 5.7 billion for 10% Reliance Industries (NS ? in the digital sector, as the social media company is looking to take advantage of its famous WhatsApp messenger to offer digital payment services to small grocers in India.
The agreement will help Reliance reduce the debt that has accumulated in its efforts to get top spot for its phone operator Jio Infocomm, and will help boost its new online grocery market JioMart.
India’s online grocery market is lucrative but competitive, with Amazon.com (O ? Pantry competing for market share with Walmart (N ? Flipkart and BigBasket, supported by China Ali Baba (NOT :).
But according to data from the Retailers Association of India, much of the untapped value resides in Indian kirana stores, or small grocers, the lifeblood of the country’s $ 375 billion food industry.
“In the near future, JioMart … and WhatsApp will enable nearly 30 million small Indian kirana stores to make digital transactions with each customer in their neighborhood,” said Mukesh Ambani, CEO of billionaire Reliance, in a statement. video.
WhatsApp has 400 million users in India, its largest market. He tried to get approval to deploy his digital payment service in India, to compete with Google Pay (O :).
“Jio and Facebook want to exploit cell phone users; both are trying to leverage payments and both want to increase bottom-up adoption, “said Tarun Pathak, associate director of Hong Kong-based Counterpoint Research.
A marriage of JioMart and WhatsApp services will help reach local users in India who shop in small stores, he said.
Facebook’s investment will make it the largest minority shareholder in Jio Platforms, Jio https: // said Wednesday, valuing the business at around $ 66 billion.
Jio Platforms owns a multitude of digital assets from Reliance, including Jio Infocomm, which became the country’s largest telecommunications operator about three years after its launch. It has approximately 370 million subscribers.
Reliance also expanded its retail operations, as profits from its petroleum and chemical refining activities took a hit.
But the expansion increased its debt to $ 40 billion in September. Reliance has said it wants to reduce net debt to zero.
“With crude prices where they are, the main oil and gas activities will be under pressure. (The Facebook deal) allows them to reduce some of their debt, and also to establish an appraisal for Jio, “said Rusmik Oza, executive vice president of Kotak Securities.
Reliance is also expected to sell shares of its refining operations to Saudi Aramco (SE :), and in its telecommunications tower assets in Brookfield.
Last month, the Financial Times reported that Facebook was in talks for a stake in Jio, but talks were halted due to the pandemic.
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