Jio Digital Fibre InvIT Gets Backstop Funding From Reliance, Mukesh Ambani

Reliance Industrial Investments and Holdings Ltd., a wholly owned subsidiary of billionaire Mukesh Ambani-controlled Reliance, will be the sponsor of Digital Fiber Investment Trust, according to InvIT's filing with the regulator. The InvIT plans to raise nearly Rs 39,706 crore by selling units to group and promoter firms and taking a loan.

• The trust will raise up to Rs 14,706 crore from subsidiaries and promoter companies. It will issue 147.06 crore units at Rs 100 apiece in a private placement.
• The trust will also raise a loan of Rs 25,000 crore at 12% interest to be provided to the fiber company from the promoter companies.

Along with the sponsor, Reliance Projects and Property Management Services Ltd., another wholly owned subsidiary of Reliance Industries, will own close to 44% in the InvIT.

All group companies will together hold 59%. Ambani’s investment arms—Sikka Ports and Terminals Ltd. and Jamnagar Utilities & Power Pvt.—will own 41%.

Reliance had spun off its fibre Infrastructure business from its telecom arm Reliance Jio Infocomm Ltd. The telecom-to-oil conglomerate had planned to monetise its tower and fibre assets to pare debt of more than Rs 1.7 lakh crore. It was able to sell stakes in tower assets but has not been able to monetise fibre assets, in which it plans to retain 50%.

This how the proceeds will be put to use:

• To buy 51% in the fibre company for Rs 265.62 crore at par and pay accrued interest of Rs 274.8 crore.
• To extend a loan of Rs 14,426 crore to the fibre company to repay or prepay some of its borrowings, accrued interest availed from banks, other lenders and RIL as well to repay suppliers, creditors, deposits and other liabilities.
• An additional Rs 25,000 crore will also be extended to the fibre company.

The fiber company has a total borrowing of Rs 87,296.3 crore, including Rs 25,342 crore from Reliance Industries. It plans to reduce its borrowings by 14,689 crore after the InvIT issue.

Jio Digital Fibre Ownership

The fiber company will have a total equity of Rs 78,640.9 crore comprising:

• 500 crore equity shares.
• 7,813.9 crore optionally convertible preference shares.
• 12.50 lakh redeemable preference shares.

The InvIT will own 51% of the equity shareholding in Jio Digital Fibre Pvt.—the fiber company—while Reliance Industries will hold 48.44% stake and 99.44% of the preference shares.

Ambitious Rollout

The fiber company owns and operates a pan-India operational optic fiber cable network of approximately 17.37 million fibre pair kilometre as of March 31, 2020, and plans to expand its to 21.10 million by end of March 2021 at a cost of Rs 20,036.6 crore.

According to its commercial r report, Reliance Jio is expected to reach more than 100 million premises by 2022.

The fiber company has struck a pact with Relinace Jio to provide infrastructure for 30 years. Reliance Jio at present contributes to nearly all of the fiber company’s revenue.

Financials

The trust earned revenue of Rs 6,125.7 crore and reported a loss after tax of Rs 5,174.7 crore as on March.

Reliance Jio will be the largest customer of the fibre company, using 60% of its infrastructure. The trust is projecting a revenue of Rs 15,197.3 crore by 2021-22 from Rs 9,571.56 crore in 2020-21. With Jio is only customer, this would be telecom operator's fiber expense. It will have to scale up its fiber-to-the-home and enterprise portfolio to meet this cost.

According to valuation firm BDO, the enterprise of InvIT assets is projected at Rs 1,75,822 crore, corresponding to an asset base as of March 31.