RIL to set up Rs 1.08-trillion digital arm, work on making Jio debt-free

Board approves the transfer of Rs 1.08 trillion debt to the new subsidiary; Jio listing could be next

Reliance Industries (RIL) on Friday announced a structure to make Reliance Jio (RJIL) debt-free, which is seen as a move to pave the way for a likely listing of its telecom business. As part of it, the company intends to transfer its telecom business and other digital initiatives to a wholly-owned subsidiary.

In the new scheme, RJIL’s debt will move to RIL. RJIL’s board approved an arrangement between RJIL and certain classes of its creditors, including debenture holders, for transferring identified liabilities of up to Rs 1.08 trillion to RIL. 

RIL’s board also approved forming a wholly-owned subsidiary for digital platform initiatives and an investment of Rs 1.08 trillion in the subsidiary through optionally convertible preference shares (‘OCPS’). This is likely to be of a 10-year tenure.  

The subsidiary will acquire RIL’s equity investment of Rs 65,000 crore in RJIL. It will subscribe to the optionally convertible preference shares.

“Given the reach and scale of our digital ecosystem, we have received a strong interest from potential strategic partners. We will induct the right partners in our platform company, creating and unlocking meaningful value for RIL shareholders,” said Mukesh Ambani, chairman and managing director, RIL.

Analysts see this as a move to clear the path for the telecom arm’s listing, as announced by the RIL management during its annual general meeting in August this year. 

After this, RJIL will have no debt except spectrum-related liabilities by March 31 next year, said RIL. 

For RIL, the company said: “There is no impact on the consolidated debt.” 

At the standalone level, where the debt is likely to increase, the company said: “It (the new capital structure) does not impact RIL’s standalone credit profile, given its robust cash flows and conservative leverage.” 

The digital platform company with negligible leverage makes a compelling investment proposition for both strategic and financial investors, said the company. 

With completing most of Jio’s capital expenditure, tower and fibre passive infrastructure assets of approximately Rs 1.25 trillion were demerged from Jio in March this year to infrastructure investment trusts (InvITs). After this demerger, Jio has become asset-light, having a balance sheet size of Rs 2.37 trillion, said RIL. The company said in a statement that Jio’s platform business included MyJio app, OTT platform JioTV, OTT platform Jio Cinema, news platform JioNews, and music-streaming platform JioSaavn.  

Over 2018-19, RIL made strategic investments in start-ups such as pharma software provider C-Square, citizen SaaS provider EasyGov, AI learning platform Embibe, retail solution provider Fynd, logistics platform Grab, AI assistant platform Haptik, music streaming platform Saavn, deep tech start-up Tesseract, and vernacular language platform Reverie. 

These get transferred to the wholly-owned subsidiary.

RIL has made significant investments in global tech start-ups such as DEN, Hathway, Eros International Plc, Edcast, Karexpert Technologies, Vakt Holdings, Indiavidual Learning Pvt. Ltd, Radisys Corp, and Kai OS Technologies.