Reliance Industries Devises New Holding Structure For Jio Digital Businesses
The boards of Reliance industries Ltd. and its wholly owned subsidiary Reliance Jio Infocomm Ltd., in separate meetings today, approved the creation of a new digital platform holding company as well as a debt restructuring.
The move will make Reliance Jio a virtually net debt free company by March 31, 2020, said a statement issued by RIL, India’s most valuable company by market capitalisation.
- RIL will form a wholly owned subsidiary for digital platform initiatives.
- This will hold digital businesses such as MyJio, JioTV, JioCinema, JioNews and JioSaavn.
- RIL will invest Rs 1.08 lakh crore in this new digital platforms company via optionally convertible preference shares.
- This new company will also acquire RIL’s equity investment of Rs 65,000 crore in RJIL giving it a total capitalisation of Rs 1.73 lakh crore.
- The new company will use this to invest in equity of RJIL
- RJIL will use the money to pay of Rs 1.08 lakh crore of debt.
The restructuring will effectively insert a new company between RIL and Jio and will result in the transfer of debt from the telecom subsidiary to parent RIL.
Consequent to the above, “RJIL will become virtually net debt free company by March 31, 2020, with exception of spectrum related liabilities,” said RIL’s statement.
The company also made it clear that this restructuring will aid the induction of financial and strategic investors into the new digital platform company.
...we have received strong interest from potential strategic partners. We will induct the right partners in our Platform Company, creating and unlocking meaningful value for RIL shareholders.Mukesh Ambani, Chairman, Reliance Industries
The statement explains that the consolidation of debt at the RIL level creates an efficient structure to manage debt and cash.
It clarifies the restructuring will have...
- no impact in the value pre and post reorganisation for any shareholder.
- no impact on the consolidated debt of RIL.
- does not impact RIL’s standalone credit profile.
The restructuring comes a few months after RJIL demerged its fibre and tower assets of approximately Rs 1.25 lakh crore to two infrastructure investment trusts, and announced that Canadian investment firm Brookfield Asset Management Inc. and other investors will invest Rs 25,215 crore in the tower trust.
By separating the digital businesses and the licenses into two companies, in addition to the infrastructure trusts, RIL has now created three distinct asset clusters to attract different types of investors. In August, at the company’s annual general meeting, Ambani had announced his intent to make RIL net debt free over the next 18 months. As of Sep. 30 the consolidated net debt of the company and its subsidiaries was Rs 1,57,236 crore.