Reliance Jio will issue 4 billion non-cumulative optionally convertible preference shares to its parent at ₹50 each for cash, the persons cited above said on condition of anonymity.
“The capital would be used to expand operations of Reliance Jio. The non-cumulative optionally convertible preference shares carry an interest rate of 9%," the first of the two people said.
Reliance Jio did not reply to an email seeking comment on Monday.
“Capital requirement for the telecom sector will stay high thanks to the constant infrastructure upgradation and the proposed 5G expansion. Jio is now focused on reaching out to India’s underserved homes and enterprise connectivity market. Its mobility services along with GigaFiber fixed-broadband services is where it is focusing now," said an analyst at a domestic brokerage.
Jio, which has borrowed to expand services, continues to invest to build capacity. As of 31 March, RIL has an outstanding debt of more than ₹2.87 trillion, which increased by ₹69,000 crore during the year due to investments in Jio. As against this, RIL had cash reserves of about ₹1.33 trillion as of 31 March.
To cut debt, Jio has decided to transfer its fibre and tower arms to two infrastructure investment trusts (InvITs)—Digital Fibre Infrastructure Trust and Tower Infrastructure Trust—which will be offered to external investors. The transfer will help it not only reduce debt but also become an asset-light digital services company.
“In our view, the InvIT has effectively allowed RIL to replace ₹710 billion of external debt with very-long-term (20-year) money and thereby remove any refinancing need on this amount of debt. It also gives more balance sheet flexibility and allows RIL to further increase spending across its consumer business if it chooses to do so," said JPMorgan in a 14 June report.
In less than three years of its launch, Jio has built a subscriber base of 306.7 million and a revenue market share (RMS) of 31.7% as of March, against Vodafone Idea’s RMS of 32.2%, and Airtel’s 27.3%.
Jio’s net profit in 2018-19 surged more than fourfold to ₹2,964 crore, from ₹723 crore in 2017-18. Standalone revenue from operations for the March quarter of fiscal year 2018-19 increased 7% to ₹11,109 crore from ₹10,383 crore in the December quarter.