Net proceeds of Jio Platforms’ IPO will go into prepayment of debt of subsidiary

Jio Platforms, that filed its draft red herring prospectus (DRHP), on Friday, has stated that the net proceeds of its proposed public issue will go into “prepayment, in full or in part, of certain outstandings availed by the material subsidiary, RJIL (Reliance Jio Infocomm Limited” and for general corporate purposes. The outstanding borrowings stand at Rs 27,500 crore.

This will be the first public offering from Reliance Industries since Reliance Petroleum in 2007. Jio entered the mobile telephony space in 2016 and since then has grown to become the largest player. Today, its digital offerings cuts across the enterprise and broadband space.  

According to the document, RJIL has entered into various borrowing arrangements including term loans in the nature of external commercial borrowings (ECBs). “An aggregate amount of up to Rs 2,75,000 million from the net proceeds is proposed to be utilised towards prepayment, in full or in part, of the principal amount outstanding of certain borrowings availed by RJIL. RJIL may, from time to time, refinance some or all of these borrowings or enter into further financing arrangements and may draw down funds thereunder,” says the offer document, filed with Securities and Exchange Board of India (Sebi). Jio Platforms plans to issue up to 27 crore shares of a face value of Rs 10 each at a price that will be determined later.

“Our company believes that such prepayment will help reduce the net debt and the associated servicing costs, and improve our net leverage and the NAV (net asset value) of the equity shares, thereby improving the results of our operations and financial condition. Additionally, the company believes that this would improve our ability to raise further resources in the future to fund potential business development opportunities,” the company’s offer document goes on to say.

The company believes, states the document, that the progressive deleveraging of the balance sheet, “further strengthened by the proposed prepayment from the net proceeds, will position the Company favourably for continued investment in its strategic priorities, including 5G network densification and expansion, fixed broadband penetration, AI and cloud services, enterprise digital services, and international technology partnerships, while maintaining the financial flexibility to pursue business development opportunities as they arise.”