Mayur Sontakke, CFA, FRM | May 13, 2020 | More on: BABA 700 9988
Apart from China, no other country can match India’s scale when it comes to the size of the market.
India is currently facing the biggest lockdown in the world. The borders are closed. However, that hasn’t stopped big dollars flowing into the country.
On April 21, Social media giant, Facebook Inc (NASDAQ: FB) announced that it has invested a whopping US$5.7 billion to acquire a 9.9% stake in India’s Jio, a four-year old telecoms operator.
Jio has disrupted India’s telecoms industry since its inception. It made internet cheaper and accessible to the masses, bringing forth the data revolution.
Last week, Silver Lake, a giant private equity firm, invested US$750 million in Jio.
Jio is driving India’s internet penetration
Jio is a unique growth story. Launched in late 2016, Jio has gained over 380 million users in less than four years, achieving the status of the largest telecom player in India.
Jio’s ascent has fueled India’s internet penetration by giving 560 million newcomers access to the web. The higher penetration has also given rise to mobile payments and other applications.
This is just the beginning. With India’s long-term economic prospects upbeat and millions more expected to move into the middle class, internet services are bound to grow further.
E-commerce giant Amazon Inc (NASDAQ: AMZN) has invested over US$6.5 billion in its Indian operations so far. Meanwhile, Walmart Inc (NYSE: WMT) acquired Amazon’s homegrown competitor, Flipkart, in 2018.
What about Alibaba and Tencent?
Chinese tech giants, Alibaba Group Holding Ltd (NYSE: BABA) (SEHK: 9988), and Tencent Holdings Ltd (SEHK: 700) have also made big bets on India’s e-commerce market.
Alibaba is the largest investor in Paytm, India’s biggest mobile payments company. Alibaba has also invested in Paytm Mall, an e-commerce platform. It also has a stake in Snapdeal, another platform in India’s crowded space.
Apart from these, Alibaba has put in money in BigBasket, a grocery delivery platform, and Zomato, a food delivery startup.
On the other hand, Tencent has invested in Walmart-owned Flipkart, food delivery startup Swiggy, and Udaan (a B2B platform).
Waiting on investments
However, Alibaba and Tencent may be forced to go slow on India. Last month, the Indian government restricted capital flows from Chinese companies and those with Chinese Nationals as the beneficial owner.
Now, companies like Alibaba and Tencent will have to seek the government’s nod before investing in India.
As Alibaba waits for two blue ticks before investing in India, Jio will crush some of the competitors – just the way it crushed other telecom operators.
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