What do you think makes the Jio platform so attractive that it had a slew of suitors in the last six weeks, which have been the worst for the world in every way possible, including in terms of investments?
What makes it attractive is a confluence of multiple factors. Jio, in a span of probably three to four years, has gone from absolutely nothing to creating a 380 million plus subscriber base at various price points, which is probably among the top five in the world. In many ways, in terms of even mobility business, the content on one side, the infrastructure on the one side as well as the content ecosystem on the other, have been actually created and bought on stream at the same time.
How many such plays can actually offer this kind of growth potential over the next five years barring China? You would struggle to find more than two or three names and the Jio platforms given the kind of backing of its parent and the growth potential even from here stand out. Till today, all the talk about creating the ecosystem and having the content in place, having a lot of enterprise solutions and apps and so on, the fact is what has been monetised today in terms of actual numbers is essentially the mobility and data business which accounts for more than 90-95% of revenue.
Very clearly, what these guys are paying money for is certainly not a mobility business. Nobody pays 11 times one year forward EV/EBITDA for just a mobility business. What they are paying for is the potential that they see to leverage on the back of this and perhaps also bring in their expertise to help Jio monetise. Today, if you look at the profile of the investors who have come on board every investor actually bring something different
Facebook is a master at monetising a database of human beings. In a sense, they provide free access and yet they are able to piggyback on the data collected to make money. The likes of Vista and may be General Atlantic are invested in enterprise software companies, which can help Jio platforms to perhaps customise solutions and create a more targeted business solutions on the cloud side as well as the enterprise software side.
It is an interesting combination of investors and obviously the potential for growth and really leveraging the subscriber base already in place that is probably something that is unique today in many ways at least in Asia if not the world.
A slew of these investments have come in, Is it also because Covid-19 and the circumstances around it have pivoted Jio’s play? For example, a plan like Jio Mart to get people to buy more groceries online. As everything is in lockdown, people do not want to go to stores. Also people are watching more movies online and consuming more broadband as they work from home. On the other hand, people want to get out of China also. Have all these factors contributed to this pivot?
I would say that it is probably a bit simplistic to assume that all these deals have come together only because the lockdown is in place. You are right to the extent that possibly the closure of these deals has been precipitated by the fact that the lockdown and the increased weariness about continuously investing only in Chinese start-ups. Maybe that has played a role in the investors coming in and closing the deals, but I would presume that deals of this size do not really get closed in months, Announcements are on one side, but the fact of the matter is these deals would have probably been negotiated over a long time.
I am not suggesting that the deals happened because of the lockdown and people using more data, but what I am saying is how these particular circumstances would have hastened the process.
Absolutely. There is no doubt that the attractiveness of Jio platforms for a potential investor has gone up immensely in the last two months, Looking at the kind of structural changes in the way people work, the extent of work from home can actually increase plus the amount of video and content that people are now consuming at home, means the value proposition for a company like Jio Platforms with the kind of data backbone and the additional capacity they have for even more of data consumption already happens across their platforms. It has definitely contributed to increasing the strategic importance of Jio platforms in the eyes of the investors and customers.
All these investments of course, have been made on the basis of future earnings potential. Jio platform is trying to transform into a sort of hold all kind of companies where you have payments as well as broadband as well as shopping and pretty much everything under one umbrella. What are the challenges this venture faces?
Probal Sen: One of the things that always is a challenge for any very fast growing digital company is that execution and service levels can lag behind the launch. Jio Mart is a classic example. My understanding is that the initial state of orders and the size and scale of the kind of interest that Jio Mart has seen is probably six, seven, several times that of their initial estimates and therefore fulfilment of a lot of orders meeting the timelines in terms of delivery and all can become a challenge. But that is obviously teething troubles, one would like to believe that as with Jio, after the initial couple of months, these things will be sorted out.