Reliance Industries Limited (RIL) has capped its emergency funding line to Jio Platforms where big investors like Facebook, General Atlantic and KKR etc are stakeholders to a maximum of around Rs 22,500 crore.
This is the maximum amount the largest conglomerate has committed to its new shareholders in case other external sources of raising money for Jio Platforms are not available on acceptable terms.
Big investors like Facebook, Silver Lake, Vista, General Atlantic, KKR, Mubadala, TPG, Abu Dhabi Investment Authority, Intel Capital and Qualcomm have poured in close to Rs 1.20 lakh crore. The company also raised Rs 53,124 crore via rights issue.
As a result of the fund infusion, the RIL, whose net debt stood at Rs 1.61 lakh crore as of March 2020, has become a net debt free company much before its original schedule of March 2021.
Facebook has got close to 10 per cent stake in Jio Platforms. The other investors including Facebook have a combined stake of close to 25 per cent in the company. Globally, the platform companies are asset light and do not require much money.
The new company with marquee investors and a new emerging tech model always has a debt or equity route available to raise working capital funds or additional funds needed for business. The capping of credit line from the promoter RIL is to safeguard its interest as there are new stakeholders in the company. This is also to safeguard investors' interest to ensure that the company gets the best deal (interest rate on debt or premium on equity), which enhances the profitability and valuation of the company before they exit the company.
Currently, Jio Platform has already made substantial investments in digital ecosystem, broadband connectivity, cloud computing and big data analytics etc. The subsidiary of Jio Platform -- Reliance Jio Infocomm -- also has good cashflows. It has built a future proof network with latest 4G LTE technology. This network can be easily upgraded to support even more data as technologies advance to 5G, 6G and beyond. "The only money they need is for the spectrum," say market sources.
Jio Platform, a next generation technology platform company, currently has an equity valuation of Rs 4.91 lakh crore and an enterprise value of Rs 5.16 lakh crore. There is a likelihood of the company coming out with an IPO in future, which will further unlock the value of the company and provide an exit route to investors.