Social media giant Facebook is seeking legal opinion on its investment with Jio Platforms so that the deal doesn't run afoul of India’s Foreign Direct Investment (FDI) towards neighboring countries, especially China.
Facebook wants to ensure that the $5.7 billion deal, for which all the spadework is all done, is in line with India’s foreign direct investment (FDI) policy which has a caveat with regard to investments from companies that have investors from China and other neighbouring countries.
And Facebook, though registered and headquartered in America, has stakeholders from China and Hong Kong including hedge funds and financial institutions.
As per a report in Business Standard, Facebook has sought out four consultancy firms to guide it through the legal maze on the deal with Jio Platforms.
The four consultancy firms named in the report are PriceWaterhouseCoopers (PwC), Ernst & Young (E&Y), Deloitte, and KPMG.
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The China factor
Though the border skirmish between India and China may have happened only this month, plenty of things had been awry between the two for quite some time now.
India has been viewing China with suspicion and is worried over "oppurtunistic acquisitions" by it. In April this year, India tweaked its FDI guidelines and made it mandatory for investments from China, Pakistan, Nepal, Bangladesh and Myanmar (all neighbouring countries of India) to go through the government route and not automatic approval.
Experts say that the Department for Promotion of Industry and Internal Trade (DPIIT) move was aimed at keeping at bay opportunistic takeovers or acquisitions of Indian companies and tech startups by Chinese investors and corporations.
The new rules are also applicable to ‘the transfer of ownership' of any existing or future FDI in an entity in India, directly or indirectly.
This is where Facebook apparently wants to be doubly sure.
For the record, two of the prominent Chinese investors in India are — Alibaba and Tencent, which have stakes in Indian Unicorns such as Paytm, Zomato, Bigbasket, Hike, Flipkart, MX Player, BYJU’s and others.
Facebook's responsibility
The rules in India are clear that in case of FDI, all the approvals have to be taken by the companies investing in.
This, of course, means that Facebook has to clear the air over whatever possible doubts that might arise in the minds of Indian authorities.
Facebook has to get the all-clear from the Ministries with regard to the China component in its equity structure.
The Facebook-Jio Platforms deal, even though it has got screaming headlines across the globe, is also in the eye of some controversies.
The Competition Commission of India (CCI) is reportedly investigating the gargantuan deal.
Also, a clutch of Indian startups is set to move legally against deal citing data privacy and competition monopoly issues.
Facebook, for its part, has already formed a separate company "Jaadhu Holdings", its subsidiary registered in Delaware, that will focus on the business with Jio Platforms.
