PE Firm Vista Equity To Invest In Jio Platforms After Facebook, Silver Lake
In less than three weeks, Reliance Industries Ltd. brought in a third investor for its digital and telecom asset as part of promoter Mukesh Ambani’s efforts to cut debt at his conglomerate.
Vista Equity Partners, a private equity firm, will invest close to Rs 11,367 crore for a 2.32 percent stake in Jio Platforms Ltd, according to a media statement by parent RIL. The deal values the digital unit at Rs 4.91 lakh crore.
Previously, RIL said Facebook Inc. would invest Rs 43,574 crore for a 10 percent stake in Jio Platforms. That was followed by a Rs 5,656-crore investment by Silver Lake Partners, an American private equity firm.
The investment by Vista Equity will be used by Jio Platforms to redeem the optionally convertible preference shares held by RIL, implying that the entire amount will go to the parent and not retained by the subsidiary. This is in line with the Facebook deal where Jio Platforms retained Rs 14,976 crore and the parent got the remaining Rs 28,598 crore for redeeming the optionally convertible preference shares it held in the digital unit. In case of the transaction with Silver Lake, however, the entire investment was retained by Jio Platforms.
After all these deals, RIL’s holding in Jio Platforms will stand at 86.5 percent, while other investors will own close to 13.5 percent.
Reliance had earlier announced its plans to restructure its telecom and digital business by consolidating the ownership of its platform apps/AI/Cloud initiatives into a separate 100 percent subsidiary. The entity also owns the mobile telecom and broadband business. The entity’s debt will be transferred to RIL for which the parent will receive Rs 108,000-crore optionally convertible preference shares of Jio Platforms.
The restructuring was aimed at housing the digital assets within a debt-free entity and making the new unit comparable with global platforms such as Alphabet Inc., Tencent Holdings Ltd. and Alibaba Group Holding Ltd., among others, which are largely debt-free and have created large digital ecosystems.
Vista Equity exclusively invests in enterprise software, data, and technology-enabled organisations. “All the three deals are just a start and we expect many such marquee deals in the next one-two years as this route provides much needed capital and advanced technologies,” Axis Capital said. “These deals will help RIL reposition itself as a consumer/technology company.”
RIL’s deal with Vista Equity, along with a rights issue announced during the fourth quarter and Facebook and Silver Lake’s investments, will lower the oil-to-telecom conglomerate’s consolidated net debt by 71 percent over FY20. The company’s net debt stood at Rs 161,035 crore as of March 2020 and the owner of the world’s largest crude oil refinery aims to bring this to zero by the end of 2020-21.
Mukesh Ambani has been spending billions of dollars to shape his online retail and telecom businesses in India. His conglomerate has also been increasingly reliant on the newer consumer units over the past few quarters to hold up its earnings when the legacy businesses face pressure. The newer businesses, including telecommunications and retail, are likely to contribute 50 percent of RIL’s earnings in a few years from about 32 percent now, Ambani had said during the company 42nd annual general meeting in August.
(Copy updated with company’s clarification on who will retain the investment amount after Vista Equity’s deal.)