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How RIL will create a debt-free digital broadband platform

Nevin John     October 26, 2019

Mukesh Ambani-controlled Reliance Industries (RIL) has begun the process of opening its digital broadband services business -- which include Reliance Jio's mobility services, content generation verticals and applications -- for strategic investment. The parent company has created a subsidiary to bring together all the digital and mobility businesses under the new entity and decided to infuse Rs 1.08 lakh crore in it to clear off the debt. RIL has already invested Rs 65,000 crore in the wholly-owned subsidiary.

The new subsidiary will become the parent of Reliance Jio Infocomm Ltd, and applications like MyJio, JioTV, JioCinema, JioNews and JioSaavn, besides content generation ventures. But it will be a direct subsidiary of RIL. Thus, Reliance Jio will become a step down subsidiary of RIL.

"The new subsidiary will become like Alibaba and Google, which claim high valuations in the stock markets," said an executive. But it is not clear whether e commerce business of Reliance Retail will be moved into it. The retail business is also looking to rope in strategic investor.

Reliance Jio will become net debt-free by March, with exception of spectrum related liabilities, after the transactions.

The strategic investor will be given stake in the new subsidiary, under Jio's board approved scheme of arrangement. At the same time when investors check in, RIL will convert its Optionally Convertible Preference Shares (OCPS) that it got for absorbing the Rs 1.08 lakh crore debts of the subsidiary and step down subsidiaries.

Reliance Jio is the second largest operator in the country with 355 million subscribers. Its tower and fiber infrastructure assets of Rs 1,25,000 crore were demerged from RJIL in March 2019 to Infrastructure Investment Trusts (InvITs). Assent management firm Brookfield has picked up stake in tower InvIT and RIL is searching for investor in fiber InvIT. Over a lakh crore debt has also been transferred into InvITs.

The new subsidiary will invest to build digital assets in healthcare, education, agriculture, commerce, government-to-Citizen services, gaming and manufacturing, said the company.

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

Also read: Reliance Jio wins availability battle; Airtel races ahead in speed, video experience

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