What makes Jio Platforms command a ₹5 trillion valuation

MUMBAI: Silver Lake Partners on Monday invested ₹5,665 crore in Jio Platforms for a 1.15% stake. This was at a 12.5% premium to Facebook’s ₹43,574 crore ($5.7 billion) deal for a 9.99% announced on 22 April.

The enterprise value of Jio Platforms, a six-month old company, is now ₹5.15 trillion, making it comparable with global platforms such as Alphabet, Tencent, Alibaba, etc., that are largely debt-free and have large digital ecosystems.

So, what has made Jio Platform a darling of investors?

It is Jio Platforms’ multiple revenue streams from the same user base.

Jio Platforms is a subscription driven model and has a lot of consumer data. It uses latest technology and cloud computing for delivery which decouples revenue from the number of users or subscribers that one has. Which means that the more times the same customer base is used for multiple revenue mechanism, the higher the valuation is.

"And for an investor this is pretty shining and the growth in user base is also good quarter-on-quarter. When you are able to add that kind of subscriber base and do multiple times monetisation, then of course it makes it very interesting as a company,” said Sanchit Vir Gogia, founder and chief executive, Greyhound Research, a technology research and advisory firm.

Jio Infocomm, on the other hand, is capex heavy, and has a linear revenue model so it does not offer much in terms of valuation.

Jio Platforms, the digital subsidiary of Reliance Industries Ltd, houses the group's digital business assets including Reliance Jio Infocomm Ltd which in turn holds the Jio connectivity business - mobile, broadband and enterprise and also the other digital assets such as JIO Apps, tech backbone and investments in other tech entities like Haptic, Reverie, Fynd, NowFloats, Hathaway and Den Networks, among others. These investments range from video content, music, natural language processing, regional language technology and even e-governance.

The technology start-ups RIL and its subsidiaries have added to its fold have also boosted valuation.

"We see the valuation as testament to the kind of brand Reliance has managed to build out of Jio. Silver Lakes is of course seeking to replicate their success with Alibaba once again. But a larger trend here is the network effect. With each successful partnership, Jio is able to grow in value and Facebook’s investment last month aided that strongly,” said Pareekh Jain, founder and lead analyst, EIIRTrend and Pareekh Consulting.

In fact, Jio, like Alibaba, announced the launch of a video-conferencing tool JioMeet last week, adding to its portfolio of apps and on track to build a super-app like its other Asian counterparts.

According to a recent report by Bank of America Global Research, from a monetisation perspective for super-apps across Asia, the focus is moving towards payments and commerce rather than just ads. The most successful super-apps case-study is Tencent’s WeChat in China, where within two years it has gained a 40% market share in digital payments, leveraging social/ payments to market more content and services to its user base.

This strategy can boost user engagement, strengthen content and service eco-systems, and offer monetisation options.

WeChat gradually shifted from acting as a traffic channel for other online content and services to becoming increasingly a platform that facilitates user activities and transactions without coming out of the app.

“ They (RIL) have also proved their capacity in retail services so the growth trajectory with investments in startups and from backers like Silver Lakes is in the right direction even if very little of the technology is available on-ground presently,” said Jain.