Rejig of group structure at RIL paves way for Jio stake sale

Mumbai: A potential stake dilution in Reliance Jio Infocomm Ltd ( RJIL) via an IPO or to a strategic investor is among the primary reasons behind the creation of wholly-owned digital subsidiary announced by Reliance Industries on Friday. With the new structure in place, the newly created entity will house all of the group's digital initiatives and will receive an investment of ₹ ₹1,08,000 crore from its parent. The subsidiary will acquire RIL’s equity investment of ₹65,000 crore in its telecom subsidiary Reliance Jio Infocomm Ltd. Consequent to the above, RJIL will become virtually net debt-free company by 31st March 2020, with the exception of spectrum-related liabilities, RIL said.

As part of this transaction, RIL will take ₹1.08 trillion of liabilities off RJIL (Jio) balance sheet into its own to ensure that the new digital business holding company has negligible debt on the books. The objective of this move is to make Reliance Jio (RJio) debt-free that will pave the way for attracting strategic investors and financial investors in the digital business to monetize the substantial investments of over $25 billion made by RIL in this business.

The new 100% subsidiary will hold all the digital business assets including Reliance Jio Infocomm Ltd which holds the Jio connectivity business - Mobile, broadband and enterprise and also the other digital assets (JIO Apps, Tech backbone and Investments in other tech entities like Haptic, Hathaway and Den Networks among others.

Mukesh Ambani-led Reliance Jio set off a brutal price war among telcos when it launched services in September 2016, triggering a wave of consolidation in one of the world’s most crowded telecom markets. The consolidation of the industry into about three large operators and an increase in Reliance Jio’s market share will set the stage for the listing of the company.

In July, Reliance Industries inked a deal with Canada's Brookfield Infrastructure Partners L.P. and its affiliates raise ₹25,215 crore ($3.66 billion) via sale of its telecom tower assets. The multi-stage transaction became the single-biggest private-equity deal ever in India.Currently, RIL is engaged with potential investor to divest a significant stake in its fibre assets and an announcement in this regard is expected in the coming months.