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IPO not necessary, Jio Platforms eyes Rs 1.4 lakh crore strategic investment

By getting financial investors who could own additional 10 per cent of company, Reliance industries could reduce dependence on a future IPO for major cash infusions, a recent analyst report said

twitter-logoNevin John | May 6, 2020 | Updated 15:15 IST
IPO not necessary, Jio Platforms eyes Rs 1.4 lakh crore strategic investment

Jio Platforms Ltd (JPL), which received thunderous response from global investors despite economic lockdowns around the world, is expected to lock in strategic investments to the tune of Rs 1.4 lakh crore by September, say sources in the know. The Silver Lake and Facebook deals are the first in line, for which the initial agreements have been signed, while another 10 per cent stake sale to other strategic investors is in discussion stage. These three strategic deals together will bring around Rs 92,000 crore to the company.

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Besides, the digital and telecom company's optical fibre investment trust (InvIT) is up for sale as the parent Reliance Industries (RIL) in talks with foreign private equity players to raise Rs 25,000 crore. Earlier, an affiliate of Brookfield Asset Management invested Rs 25,215 crore in the Tower Infrastructure Trust, an infrastructure InvIT, which has 51 per cent stake in Reliance Jio Infratel. If the fibre deal materialises, the capital which comes to the Mukesh Ambani-led firm through the two InvITs will touch Rs 50,000 crore, say the sources. RIL executives were earlier in negotiations with a group led by Abu Dhabi Investment Authority (ADIA) that included I Squared Capital and GIC of Singapore to sell the fibre InvIT, but it failed to fructify because of differences in commercial and operating terms.

ALSO READ:Silver Lake to invest Rs 5,655 cr in Jio Platforms at higher valuation than Facebook deal

The Indian conglomerate has spent nearly Rs 4 lakh crore to build Reliance Jio. American social media giant Facebook agreed two weeks ago to buy 9.99 per cent stake in JPL for Rs 43,574 crore. The deal will be concluded by June. In the second deal, private equity firm Silver Lake agreed to invest Rs 5,655.75 crore in JPL for a 1.15 per cent stake at an equity value of Rs 4.90 lakh crore and an enterprise value of Rs 5.15 lakh crore. The arrived equity valuation is at a 12.5 per cent premium to the earlier valuation at which Facebook announced its investment, RIL said in a statement on Monday. Announcing the financial result for fiscal 2019-20, RIL said that the company is expecting another investment of the same size as Facebook-Jio deal with strategic investors.

Mukesh Ambani said in the last annual general meeting that Jio and retail businesses will go for IPOs within 5 years, which is a long window. Bank of America Securities said in its recent report that JPL will be able to raise $16-17 billion through the IPO of 25 per cent minimum free-float at the present valuation of $65 billion. "By getting financial investors who could own additional 10 per cent of company, RIL could reduce dependence on a future IPO for major cash infusions," the report said.

The telecom arm Reliance Jio, which is a subsidiary of JPL, has grown as one of the largest telecom networks with a subscriber base of 380 million in a short span of three years. In its splendid journey, it disrupted the entire telecom business in the country and many telecom companies either stopped their services, merged with competitors, or filed for bankruptcy.

ALSO READ:Reliance eyes net zero debt status before March 2021; one more Facebook-like deal on anvil

JPL was created as the immediate subsidiary of RIL in October last year to bring together all digital and mobility businesses under one roof. This new entity has become the parent of Reliance Jio Infocomm and applications like MyJio, JioTV, JioCinema, JioNews and JioSaavn, besides content-generation ventures. Thus, the operating company Reliance Jio became a step-down subsidiary of RIL.

For making JPL debt-free, RIL has infused Rs 1.08 lakh crore in it. They want to build JPL like Alibaba and Google, which claim high valuations in the stock markets. The Facebook deal emphasises that JPL will expand as a digital giant for India. RIL has been using the cash flow from its flagship petroleum refining business to build the telecom and retail subsidiaries all these years.

It posted standalone revenue from operations of Rs 54,316 crore in 2019-20, up by 33.6 per cent compared to the previous financial year. The net profit of Rs 5,562 crore was 87.7 per cent higher.

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