Jio Platforms stake sales, rights issue to cut RIL debt by Rs 1 lakh crore in Q1

The first quarter of this financial year turned out to be one of the most difficult periods in the history of corporate India. The spread of coronavirus and the fearsome shutting down of manufacturing plants across the country has frightened the industry. But Mukesh Ambani is going strong and plans to cut down Reliance Industries' debt by nearly Rs 1 lakh crore by June-end. If they are able to conclude the announced deals in the quarter, the net debt will come down to Rs 61,000 crore.

To achieve the target, Jio Platforms Ltd (JPL) on Friday announced its fifth stake sale deal to sell 2.32 per cent stake to private equity giant KKR for Rs 11,367 crore. Interestingly, all the deals happened during the lockdown time. Just before the lockdown RIL shares plummeted 40 per cent because of the panic sale in the stock market. However, the fall didn't affect JPL, which is valued at Rs 4.9 lakh crore, according to the valuation at which private equity deals happened recently.

Also read: Mukesh Ambani scores 5th cheque! KKR to invest Rs 11,367 cr into Jio Platforms

KKR's largest investment in Asia comes with the JPL deal. With this, JPL has raised Rs 78,562 crore from leading technology investors including Facebook, Silver Lake Partners, Vista Equity Partners and General Atlantic in a month's time.

RIL said, "The investments by leading global growth investors will help enable Jio scale its ecosystem towards building a Digital Society in India." The company has so far signed agreements to sell 17.12 per cent stake in JPL. Of this, Facebook with 9.99 per cent stake will have a board position.

Mukesh Ambani plans to cut RIL's net debt to zero by March 2021 through the ongoing rights issue of Rs 53,125 crore, the announced strategic investments of Rs 78,562 crore and BP Plc's investment of Rs 7,000 crore in fuel retailing joint venture. However, 25 per cent of the rights issue or Rs 13,300 crore will come to the company by June. The company has a net debt of Rs 1,61,035 crore, which increased by Rs 8,000 crore in the last financial year. The outstanding gross debt of the company stood at Rs 3.36 lakh crore in March 2020, while cash and cash equivalents at Rs 1.75 lakh crore.

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

Jio is being built as the next generation software product and platform company. The digitisation opportunity in India after COVID-19 pandemic and Jio's capabilities in cutting-edge technologies and tools such as AI, Blockchain, AR/VR, Big data have attracted the global giants, said the company earlier.

JPL was created as a subsidiary of RIL in October last year to bring together all digital and mobility businesses under one roof. The 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.

To make JPL debt-free, the parent company has infused Rs 1.08 lakh crore in it. They want to build JPL like Alibaba and Google that claim high valuations in 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. The Indian conglomerate has spent about Rs 4 lakh crore to build Reliance Jio.

Also read: Mukesh Ambani's Jio Platforms scores hat-trick; bags Rs 11,367 cr investment from Vista after FB, Silver Lake

Also read: General Atlantic to invest Rs 6,598 crore in Mukesh Ambani's Jio Platforms