RIL gains on plan to rejig group structure

Reliance Industries (RIL) said it will setup a wholly owned subsidiary for digital platform initiatives.

Shares of RIL were up 2.20% to Rs 1465.70. The announcement was made after trading hours on Friday, 25 October 2019.

The board of directors of RIL approved the formation of a wholly-owned subsidiary (WOS) for digital platform initiatives and investment of Rs 1,08,000 crore in the WOS through OCPS. The WOS will also acquire RIL's equity investment of Rs 65,000 crore in RJIL.

The board of directors of Reliance Jio Infocomm (RJIL) approved a scheme of arrangement between RJIL and certain classes of its creditors including debenture holders for transfer of identified liabilities of up to Rs 1,08,000 crore to RIL.

Rights Issue of optionally convertible preference shares (OCPS) aggregating up to Rs 1,08,000 crore for the purpose of payment of consideration for transfer of identified liabilities - WOS to subscribe to this issue.

Consequent to the above, RJIL will become virtually net debt free company by 31st March 2020, with exception of spectrum related liabilities.

RIL said that like global technology peers, the digital platform company with negligible leverage makes a compelling investment proposition for both strategic and financial investors, many of whom have evinced strong interest in partnering with us. It will have significant financial strength to address the digital services opportunity in India. The proposed consolidated structure will be compliant with all statutory requirements.

The proposed digital platforms holding company will hold all digital platforms including RJIL. It will help with further development initiatives of cutting-edge technologies and fostering inclusive digital society through collaborations & partnerships. It will have a capital and organization structure that is benchmarked to global digital technology players.

The arrangement ensures monetization opportunities accrue to shareholders efficiently. There will be no impact in the value pre and post reorganization for any shareholder. ere is no impact on the consolidated debt of RIL. Consolidation of liabilities in RIL will create an efficient structure to manage debt and cash. It will not impact RIL's standalone credit profile given its robust cash flows and conservative leverage.

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