RIL to consolidate digital businesses under holding co; to offload Jio's Rs 1.08 lakh crore debt

The board of Reliance Industries has approved the formation of a wholly-owned subsidiary for its digital businesses. The Mukesh Ambani-led conglomerate will invest Rs 1.08 lakh crore in the entity through optionally convertible preference shares (OCPS). The Reliance subsidiary will also acquire its equity investment of Rs 65,000 crore in Reliance Jio, raising the company's investment in digital platforms to Rs 1.73 crore.

"The Board of Directors of RJIL approved: a scheme of arrangement between RJIL and certain classes of its creditors including debenture holders for transfer of identified liabilities of up to Rs 1.08 lakh crore to RIL; and rights issue of OCPS aggregating up to Rs 1.08 lakh crore for the purpose of payment of consideration for transfer of identified liabilities," RIL said in a statement on Friday.

The new RIL subsidiary will subscribe to the abovementioned rights issue. Consequently, Reliance Jio will become virtually net debt-free company by March 31, 2020, with the exception of spectrum-related liabilities.

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The subsidiary will hold all digital businesses under RIL, including those under Jio, as well as emerging ones focussed on digital services and innovation. The unified digital platform will help in developing "cutting-edge technologies", as well as capital and organisational structure at par with global peers.

"This new company... will bring together India's No. 1 connectivity platform, leading digital app ecosystem and world's best tech capabilities globally, to create a truly digital society for each Indian," said RIL chairman Mukesh Ambani about the formation of the new digital platform company. "Given the reach and scale of our digital ecosystem, we have received strong interest from potential strategic partners. We will induct the right partners in our Platform Company, creating and unlocking meaningful value for RIL shareholders."

Reliance stated that the arrangement will ensure monetisation opportunities accrue to shareholders efficiently. The company also assured that there will be no impact on the value before and after reorganisation for any shareholder. Its consolidated debt will also remain unchanged, RIL stated.

Moreover, consolidation of liabilities in Reliance Industries will create an efficient structure to manage debt and cash, Reliance said in its statement. The move will not impact RIL's standalone credit profile given its robust cash flows and conservative leverage, the company further stated.

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