Reliance Jio Infocomm Ltd may pare debt by monetizing its fibre and tower assets through the infrastructure investment trust (InvIT) route, analysts said after a meeting with top executives of parent Reliance Industries Ltd (RIL).
Reliance Jio, which decided to separate the telco’s tower and fibre assets last month, said this will help Jio become an asset-light digital services company. Jio is spinning off its fibre and tower businesses into Jio Digital Fibre Pvt. Ltd and Reliance Jio Infratel Pvt. Ltd, respectively.
“The end objective will be to have different set of investors who would want to run these companies. This means that these assets go off our balance sheets, so the liabilities also go down," RIL’s joint chief financial officer Srikanth Venkatachari told reporters on Thursday.
Jio’s profit rose to ₹831 crore in the December quarter from ₹681 crore in the preceding three-month period.
"The planned monetization of fibre and tower assets through a transfer to two separate entities, in three to six months, which is likely to follow an InvIT structure, will help reduce Jio’s debt, make it asset-light, and transfer future capex to the new entities," wrote Citi Research in its report dated 18 January.
InvIT is a mechanism that enables developers of infrastructure assets to monetize them by pooling multiple projects under a single entity or a trust structure. InvITs are long-term instruments structured as funds with a very long tenure or open-end structure. InvITs pool small sums of money from multiple investors for investing in assets that ensure cash flow over a period of time. Investors receive part of the cash flow back, in the form of dividend.
Jio will be open to sharing the infrastructure with other telecom operators on market-based pricing and it does not view the sharing of the assets as a loss of competitive advantage. Analysts, however, say that Jio’s intent to monetize its own fibre assets could create more competition in the fibre sharing business.