RIL’s debt-free ambitions to stay on course with latest investment
RIL had a net debt of ₹1.53 trillion at the group level as on 31 December. The debt has surged in the past few years especially due to the aggressive expansion drive of Reliance Jio Infocomm Ltd
MUMBAI : Jio Platforms Ltd’s stake sale to Facebook Inc. for ₹43,574 crore will assuage its parent Reliance Industries Ltd’s biggest concern—debt.
RIL had a net debt of ₹1.53 trillion at the group level as on 31 December. The debt has surged in the past few years especially due to the aggressive expansion drive of Reliance Jio Infocomm Ltd.
Following the announcement, Credit Suisse said in a report that Facebook’s investment should put RIL on course to be net-debt-free by March 2021, adding that the investment will also accelerate Jio’s digital monetization drive.
The 9.99% stake sale to Facebook values Jio Platforms at ₹4.62 trillion. This is the largest investment for a minority stake by a technology company anywhere in the world, and the largest foreign direct investment (FDI) in the technology space in India.
RIL has been considering several asset monetization plans to reduce its debt.
Last year, RIL chairman Mukesh Ambani had said that the group was in talks to sell a 20% stake in its oil-to-chemicals division to Saudi Aramco at an enterprise value of $75 billion.
In July 2019, RIL had announced that it had entered into an agreement with asset management firm Brookfield for an investment of ₹25,215 crore in Jio’s telecom tower assets.
The deal, which was also aimed to reduce RIL’s debts, hasn’t got all the government approvals yet.
The Facebook deal may prove to be crucial for RIL in terms of curbing debts, especially so, as the talks with Aramco may have taken a backseat with oil prices nosediving to historic lows.
Last August, Ambani had said in his AGM speech that the group aims to be net-debt-free by end of March 2021.
Last October, RIL had announced a restructuring plan through a scheme of arrangement, under which it transferred ₹1.08 trillion of debt from Jio to a standalone entity, and left ₹64,000 crore worth of liabilities (arising from spectrum liabilities and capex creditors) with Jio.
Most global and domestic research houses said the latest deal is in line with RIL’s ambitions to make the group debt-free.
UBS Securities India Pvt. Ltd said in a report that potential partnerships and stake sales, along with reduced capex, will help RIL move on the path to zero-debt.
Morgan Stanley said in a report on Wednesday that the RIL-Facebook deal will lower RIL’s net debt by 12%.
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