GlobalData on Monday said that the “interest in Jio will definitely augur well for other Indian technology companies” at a time when companies across the globe are bracing up for digitisation. The data and analytics company said that several Indian IT vendors are struggling due to the COVID-19 outbreak in stark contrast to its global counterparts who have increased their valuations. GlobalData highlighted Apple as a global technology company increasing valuations over the past six months. It has to be noted that Apple has passed the US$2 trillion mark in market capitalisation value.
Jio Platforms Transformed into Tech Juggernaut
GlobalData said that “Jio Platforms has transformed into a tech juggernaut” at a time when traditional Indian IT companies have been “waiting to tide over the impact of the pandemic.”
Reliance Industries in July highlighted that Jio Platforms has raised Rs 152,056 crores from 13 investors including Facebook, Google, Silver Lake, Vista Equity Partners, General Atlantic, Intel Capital and Qualcomm Ventures. The investment process was kick started by Facebook in April, 2020 with Reliance in July highlighting that the process has been “concluded” with the Google deal in July.
Facebook invested Rs 43,574 crores in Jio Platforms, a wholly owned subsidiary of Reliance Industries in April. The partnership between Jio Platforms and Facebook is said to be “unprecedented in many ways.” It was said that the goal with the investment was to “enable new opportunities for businesses of all sizes, but especially for small businesses across India and create new and exciting digital ecosystems.”
Meanwhile, Google in July announced an investment of Rs 33,737 crores for 7.73% in Jio Platforms. Additionally, it was said that Jio Platforms, the company behind Reliance Jio and Google have entered into a commercial agreement to jointly develop an “affordable smartphone.” Crucially, the entry level smartphone developed jointly between Jio Platforms and Google is said to have optimisations to the Android operating system and the Play Store.
Reliance Industries said that it would hold 66.48% stake in Jio Platforms with the rest being held by the 13 investors. Facebook and Google are the largest minority stakeholders in Jio Platforms followed by KKR with 2.32% stake. Further, the other major technology companies like Intel and Qualcomm hold 0.39% and 0.15% stake in Jio Platforms respectively.
"While Indian IT vendors seeing such stark contrast to global counterparts is unfortunate, this is just the nature of the IT services business model, which, in contrast to software, needs projects in the pipeline,” Nishant Singh, director of technology at GlobalData, said in the release. “With the COVID-19 outbreak, enterprises halted all non-critical expenses, including plans to upgrade or transform their IT infrastructure. This has had an impact on Indian IT companies, since most of their revenues are from IT services.”
GlobalData said that the big technology companies like Tata Consultancy Services (TCS), Infosys, Wipro and HCL have traditionally been the IT services giants. Further, GlobalData said that the IT services companies unlike their counterparts in the software space do not have a “large stash of intellectual property making it slightly difficult for the market” to segregate the firms.
"A lot of the faith in global technology companies comes from the fact that they have a pretty robust suite of intellectual property, including hardware, software and ecosystems that serve consumers and enterprises alike,” Singh said. “The growth in stock prices merely reaffirms that technology companies – primarily 'Big Tech' companies – are well poised to tide over the pandemic-induced recession."
Jio to Aid in Reviving Investor Confidence in Indian Technology Companies
GlobalData highlighted that the Indian technology companies including the large firms are struggling to recover the valuations lost to COVID-19. The company said that TCS, India’s biggest IT services company has only managed to recover the valuation lost to COVID-19 pandemic. However, GlobalData said that the market would show more confidence in the traditional IT vendors in the near future.
"With enterprises across the world now gearing up for digitisation, Indian IT services vendors will witness a lot of action,” Singh said. “Coupled with the market euphoria witnessed for Jio, the technology landscape in India could well witness a drastic revival in investor confidence."