Please ensure Javascript is enabled for purposes of website accessibility

Facebook Is Making a $5.7 Billion Bet on India

By Evan Niu, CFA - Apr 23, 2020 at 7:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

That's more than the social networking juggernaut spent on Oculus and Instagram combined.

Earlier this week, social networking giant Facebook (META 1.70%) announced a massive $5.7 billion investment in Jio Platforms. Jio is a subsidiary of Reliance Industries, a multinational conglomerate that also has subsidiaries in retail, telecommunications, petrochemicals, textiles, and more. Of course, Facebook is primarily interested in booming internet adoption within the world's second-most-populous country, and the company notes that Jio has helped bring nearly 400 million people online in recent years.

The investment will give Facebook a stake of just under 10%, making it Jio's largest minority shareholder.

Indian people using smartphones

Image source: Getty Images.

India is WhatsApp's biggest market

The money will help beef up Reliance's balance sheet, as the company has loaded up on debt in recent years in order to build out telecommunications infrastructure. Reliance is hoping to extinguish all net debt by March 2021.

Facebook says its goal is to help businesses, including the 60 million small businesses in India, explore new opportunities. The company will collaborate with Jio to help accelerate the adoption of the digital economy. For example, Facebook and Jio will integrate WhatsApp with JioMart, a local e-commerce platform that is trying to compete with Amazon (AMZN 2.07%) and Walmart (WMT 1.85%).

Both Amazon and Walmart have been aggressively expanding in India. Amazon announced in January that it was investing $1 billion in India, and Walmart made an enormous $16 billion investment in India's Flipkart a couple years ago.

WhatsApp is wildly popular in India. In fact, India is WhatsApp's biggest market, with over 400 million monthly active users. That means nearly a third of India's 1.3 billion people are on the messaging service, and that India represents about a fifth of WhatsApp's total 2 billion users. Integrating with WhatsApp could give JioMart a huge advantage over rivals.

More than Oculus and Instagram combined

The news also comes years after Facebook received widespread criticism around its Free Basics program, which offered free access to bare-bones internet services in developing markets like India. Critics argued that Free Basics was essentially "digital colonialism," pushing users into Facebook's ecosystem. India banned the service in 2016.

The investment is among the biggest deals Facebook has ever done, second only to the $21 billion acquisition of WhatsApp. At $5.7 billion, the Jio deal is far more than what Facebook spent on Oculus ($2 billion) and Instagram ($715 million) combined.

The company noted in its most recent annual report that India was one of its "key sources" of user growth in 2019, along with Indonesia and the Philippines. In its never-ending quest for more users, Facebook is making a huge bet that it can make itself indispensable for social networking, communication, and local e-commerce.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Amazon and Facebook. The Motley Fool owns shares of and recommends Amazon and Facebook and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
META
$180.50 (1.70%) $3.01
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$143.55 (2.07%) $2.91
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$132.22 (1.85%) $2.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.