KKR to buy 2.32% in Reliance’s digital unit for ₹11,367 crore3 min read . Updated: 22 May 2020, 11:09 PM IST
The deal, once completed, will mark the largest investment in Asia by US-based private equity firm KKR
KKR and Co. Inc. said on Friday it will invest ₹11,367 crore in Reliance Industries Ltd’s (RIL’s) digital assets subsidiary Jio Platforms Ltd, in what would be its single-largest investment in Asia so far.
The deal will fetch the New York-based private equity (PE) giant a 2.32% stake in Jio Platforms, which is in a capital raising spree, having swung five hefty share sale deals in just a month, including the latest transaction.
KKR’s investment will take Mukesh Ambani-promoted RIL closer to its target of shedding net debt worth ₹1.53 trillion by March 2021. RIL has got investment commitments from five marquee global investors that will help it repay more than half of its net debt.
This is significant, given the deals were struck in a subdued equity market due to the covid-19 pandemic. Many of these investment discussions were initiated at least six months ago.
Together, the five deals allow Jio Platforms to raise about ₹78,561.75 crore.
Facebook’s April announcement that it would invest $5.7 billion for a 9.99% stake in Jio was quickly followed by $750 million from Silver Lake and $1.5 billion from Vista Equity Partners. On 17 May, Jio Platforms said it was raising $870 million from another New York-based private equity powerhouse, General Atlantic.
For KKR, the investment in Jio is a bet on growing digitization, with more and more consumers spends moving to online from offline and Jio’s holistic approach in tapping the digital opportunity of the Indian market.
“If you look at the rationale, there are several layers of opportunities: you’ve got strong, foundational infrastructure, high-quality technology infrastructure, and most of the investment (by Jio) has already been made," said Sanjay Nayar, chief executive officer of KKR India, on the phone.
“Among their initiatives has been the bundling of more digital services with their own smartphone devices and the MyJio app—and offering these bundled services to Indian consumers at a really affordable price. On top of that, you have this incredibly rich enterprise story and its assistance to small businesses, as well as the e-commerce and digital opportunity."
Nayar pointed out that Jio’s efforts come at a time when India is digitizing rapidly.
“Digitization has been a major governmental focus, and it is the only efficient way to reach Indians in rural India. And if you can deliver services and goods to people at the right affordability levels, they will take the opportunity to consume. That is a strong thesis here."
These deals will help Jio Platforms get support from globally credible names, which in turn will work in its favour in two ways: They will help RIL build investor confidence for its ongoing ₹53,000 crore rights issue in a choppy market, and they are also key to Jio Platforms extending its digital offerings.
Jio Platforms’ subsidiary, mobile operator Reliance Jio Infocomm Ltd, has brought in fast, cheap internet to over 388 million subscribers, many from traditionally underserved sections, which made Jio the country’s top mobile data provider in the process.
Like other recent transactions, the KKR deal values Jio Platforms at ₹4.91 trillion.
KKR will be making the Jio investment from its Asia private equity and growth technology funds.
While this is the first tech investment in India of this scale and magnitude by KKR, the private equity firm has been an active investor in the tech space in Asia as well as its home market, the US.
“We are not a prolific, early-stage e-commerce investor, but we are attracted to a wide range of tech opportunities. In Asia, our tech franchise has invested in GoJek in Indonesia and Voyager in the Philippines, among other investments. In Asia and the US, we are experienced technology investors, and that will be brought to bear wherever we can help Jio," said Nayar.
KKR’s core private equity business in India today has just under $4 billion of equity invested.
Ridhima Saxena contributed to this story.