Reliance Industries Ltd said on Monday that it has agreed to sell a 1.15% stake in unit Jio Platforms Ltd to private equity investor Silver Lake Partners for ₹5,655.75 crore, days after it sold a bigger stake to Facebook Inc., as India’s most valuable company aims to wipe off its debt.
The Indian conglomerate said it sold the stake to the US private equity firm at a 12.5% premium to Facebook’s $5.7 billion deal for a 9.99% stake that was announced on 22 April. The transaction values Jio Platforms at ₹4.9 trillion, Reliance said, adding that the enterprise value of the unit was ₹5.15 trillion.
Reliance is raising funds at a breakneck pace as it attempts to cut its debt and secure its capital needs amid a sharp downturn in the global economy. The collapse in oil prices and demand for fuels because of coronavirus-related lockdowns has led to the sharpest profit decline in nearly two decades at its main chemicals and refining division.
Chairman Mukesh Ambani, Asia’s richest man, has pledged to cut Reliance’s $21.4 billion net debt to zero, but a critical part of the plan, which is to sell a stake in the company’s refining and chemicals unit to Saudi Aramco for $15 billion, looks uncertain because of the plunge in oil prices. Still, Reliance reiterated last week that it will manage to reach its target ahead of schedule.
If the Facebook and Silver Lake deals go through, it will accelerate Reliance’s overall deleveraging plans, analysts said. Reliance also announced a rights issue worth ₹53,125 crore to pare its debt, the biggest such equity sale through India’s public markets.
“This (Jio-Silver Lake deal) is credit positive as it enhances RIL’s already strong financial flexibility, including the recently announced rights issue and investments by Facebook Inc.,” said Vikas Halan, senior vice-president (corporate finance) at Moody’s. Halan added that these initiatives could reduce net debt by about $13.6 billion from the reported net debt of $21.4 billion as on 31 March.
Reliance will use the investment proceeds from Silver Lake to redeem optionally convertible preference shares , according to Axis Capital.
“Silver Lake and Facebook deals are just a start and we expect many such marquee deals in the next one-two years, as this route provides much-needed capital and advanced technologies,” said Axis Capital in its report dated 4 May.
Silver Lake is a major technology investor, with over $40 billion in combined assets under management and committed capital. Its investments have included Airbnb, Alibaba, Ant Financial, Alphabet’s Verily and Waymo units, Dell Technologies and Twitter among others.
Reliance’s shares fell 2.12% to ₹1,432.80 on BSE, outperforming the benchmark Sensex’s 5.94% dive on Monday.
Jio Platforms, created last October, houses all of Reliance’s digital business assets, including Reliance Jio Infocomm Ltd and the other digital assets—Jio apps, tech backbone and investments in other tech entities such as Haptic, Hathaway and Den Networks.
Egon Durban, Silver Lake co-chief executive and managing partner, said, “Jio Platforms has brought extraordinary engineering capabilities to bear on bringing the power of low-cost digital services to a mass consumer and small businesses population. The market potential they are addressing is enormous.”
