After Facebook Deal, Jio Platforms To Sell Another 10%
RIL’s plans to induct more investors in its technology business and pare debt overall.
Mukesh Ambani-led Reliance Industries Ltd. plans to raise another $6 billion from sale of shares in its newly created subsidiary Jio Platforms soon after selling a stake to social media giant Facebook.
In October, as part of an internal restructuring of the company’s business structure and so as to bring more investors on board, Reliance aggregated all its technology development platforms, apps and services under Jio Platforms Services Ltd, which in turn holds 100 percent of Jio Infocomm, the telecom business. In April, Facebook announced it will invest $5.7 billion, or Rs 43,574 crore to acquire a 10 percent stake in Jio Platforms via purchase of new shares.
The amount we got from Facebook for Jio Payments is 50 percent of the targeted value unlocking in our minds, V Srikanth, deputy chief financial officer of RIL said in a conference with journalists and analysts on April 30. “We have also mentioned that we have received interest from other global investors for similar size additional stake,” he added.
At the time of the Facebook deal announcement, RIL had said it received interest from strategic partners and financial investors and estimated enterprise value for the platform entity at $60-70 billion, nearly 1.7-2 times the invested capital.
Facebook’s investment in Jio Platforms values the subsidiary’s equity at Rs 4.36 lakh crore on an expanded equity basis. Given a pre-deal enterprise value of Rs 4.61 lakh crore, that indicates the debt of around Rs 40,000 crore.
Facebook’s investment in Jio Platforms will be via purchase of fresh equity shares as well as compulsorily convertible preference shares, Anshuman Thakur, chief strategy officer at Reliance Jio said in the conference. The remaining 90 percent will be owned by RIL and minority shareholders.
Of the Rs 43,574 crore, Jio Platforms will retain Rs 14,976 crore and the remaining will be used to redeem optionally convertible preference shares worth Rs 28,598 crore held by the parent . Facebook will get one seat on the 15-member board of Jio Platforms.
The restructuring of the consumer and digital business stems from the fact that in the last decade asset-light technology companies have created more value than aggregate market cap of all energy companies in the S&P 500 index, said Alok Agarwal, chief financial officer of RIL during the earnings conference. Strategic investments in digital and organised retail platforms underpin RIL’s participation in the next leg of value creation, he added.
Debt Repayment Plans
RIL hopes to close fund raising of Rs 1.03 lakh crore by June-end, including a rights share issue it announced last week.
Rights Issue: Rs 53,125 crore
Facebook – Jio Platforms deal: Rs 43,574 crore
Fuel retail joint venture with BP: Rs 7,000 crore
Future asset divestments include
- a 20 percent stake sale in newly formed wholly-owned subsidiary Reliance O2C Ltd. to Saudi Aramco for $15 billion enterprise value,
- additional stake sale in Jio Platforms for close to $6 billion,
- conclusion of the telecom tower assets sale to Brookfield,
- and, RIL is in advanced talks to sell its telecom fibre assets.