How the Jio Platforms stake was monetized?
Over the last 7 weeks, Reliance has placed a little over a fifth of Jio Platforms to Facebook and a clutch of Private Equity (PE) investors.
|Sale of Jio Stake||Stake Sold||INR Amt||Implied Valuation|
|Silver Lakes - 2 Rounds||2.08%||10,203||4,90,529|
|General Atlantic Partners||1.34%||6,598||4,92,388|
|Kohlberg Kravis Roberts (KKR)||2.32%||11,367||4,89,957|
|Abu Dhabi Investment Authority (ADIA)||1.16%||5,684||4,90,000|
Barring the 9.99% strategic investment by Facebook, all the other PE deals have been done at an approximate valuation of $65 billion for Jio Platforms. Reliance Industries has already monetized 21.06% of Jio Platforms.
Jio Platforms makes Digital the big story for 2020
One big shift due to the string of deals is that digital has become the most prized property in India. Telecom is getting an opportunity to reinvent and reposition itself. Amazon is in talks with Bharti Airtel to pick up a 5% stake for a consideration of around $2.1 billion. That values Bharti at around the current valuation of $42 billion. Even Vodafone Idea, which was struggling just 6 months back after the AGR issue, has tripled in value in the last couple of months. Vodafone Idea is reportedly getting suitors like Google interested in a 5% stake in as Google marks its entry into the Indian digital space. But the biggest shift has been in valuations. If you look at the five most valuable companies in India, you have telecom companies (Reliance and Bharti Airtel) at the first and fifth positions. Even if you consider just the Jio valuation of $65 billion, Jio would still rank in the top-5 by market cap in India.
Billion dollar question on Reliance net debt
That brings back the billion dollar question; will this monetization enable Reliance to become zero debt by Mar-21? In fact, it now looks a lot more likely that Reliance should be able to turn zero net debt by the stipulated time frame. Here is how the net debt figure for Reliance Industrieslooked like in March 2020.
|Gross Debt||Rs336,000cr||Excludes non-debt liabilities|
|Cash Available||Rs175,000cr||Cash and short term investments|
|Net Debt||Rs161,000cr||Net debt targeted to become zero|
The real question is how will Reliance be able to repay Rs.161,000 crore by Mar-21. Normally, the Jio Platforms monetization till date and the rights issue of Rs53,125 crore should have been sufficient. But, RIL has only collected 25% of the rights amount in the first tranche with the balance to be paid in May 2021 and November 2021. That would be too late for the Mar-21 target. However, Reliance has unfinished deals with Aramco, Brookfield and BP which can help in reaching the target.
|Jio Monetization (21%)||Rs97,887cr||Total amount raised|
|Rights Issue Proceeds (25%)||Rs13,281cr||25% of Rights Proceeds|
|Total Funds available||Rs111,168cr||Funds in hand|
|Total Net Debt||Rs161,000cr||Target to become zero by Mar-21|
|Gap to be bridged||Rs49,832cr||Assuming no additional debt|
Reliance has 2 options to bridge this gap of Rs49,832cr and become zero debt by Mar-21.
- The first option is that the 20% stake sale in the oil refining and chemicals business to Saudi Aramco for Rs.112,000cr goes through. Even if only half that stake is sold or even if it is sold at lower valuations, RIL can become zero net debt.
- Alternatively, if Aramco deal takes longer the sale of JIO towers to Brookfield and oil marketing JV to BP should bring in nearly Rs33,000cr. The balance can be managed by selling another 3-4% stake in Jio Platforms and Reliance still retains 75% in the company.
- At this point, RIL may not dilute much more in Jio Platforms than what it has already done. A lot will depend on how the Aramco, Brookfield and BP deals work out for RIL to meet its zero-debt target by Mar-21. For a company that monetized Rs1 trillion from 7 investors in just 7 weeks, that should not be a very tall order!