Facebook's $5.7 bn investment in Jio Platforms to cut RIL's net leverage, credit positive: Moody's

Facebook's Rs 43,600 crore investment in Reliance Industries' digital services business will help the Mukesh Ambani-led firm reduce borrowing and reinforce the company's commitment to cut its net debt to zero by March 31, Moody's Investors Service said on Thursday.

Stating that the investment is credit positive, Moody's in an issuer comment said it expects the transaction to reduce RIL's consolidated net debt/EBITDA by 0.4x to well below 3.0x, the tolerance level for its Baa2 rating.

As part of the transaction, Facebook will acquire 9.99 per cent of Jio Platforms Limited, a fully-owned subsidiary of RIL that houses the company's digital services business including its mobile telecom services business -- Reliance Jio Infocomm Limited (RJIL).

The transaction also solidifies Jio's leading market position in India's growing digital ecosystem.

"The investment by Facebook establishes a valuation for RIL's digital services business and can be used as a base for further divestment by the company," it said.

This also increases RIL's financial flexibility.

In addition to the financial investment, the companies also announced strategic partnership to tap into India's growing online retail and digital payments markets.

"While we expect RIL's earnings from its refining and petrochemical segment to be negatively impacted by the global coronavirus outbreak, its digital services business have benefitted from the increase in demand for digital connectivity," it said.

Moody's said it expects RIL's EBITDA to decline over the next 12 months but its credit metrics may remain appropriate for its ratings if it successfully executes its announced transactions.