Moody's, Fitch give thumbs-up to FB-Jio deal, says to help RIL deleverage

International credit rating agencies Fitch Ratings and Moody's Investors Service on Thursday said the USD 5.7 billion Facebook deal will help Reliance Industries deleverage its balance sheet and monetise digital platforms.

In separate issuer comments, the rating agencies said Facebook's investment for a 9.99 per cent stake in Jio Platforms - the digital services business of RIL, reinforces the Mukesh Ambani-run firm's commitment to reduce its net debt to zero by March 31.

Reliance Jio, the wireless market leader with around 390 million subscribers, is a subsidiary of Jio Platforms.

As part of the Facebook deal, which is the single-largest FDI in the Indian telecom and technology sector, Reliance Retail -- RIL's retail arm -- has also partnered with Facebook's WhatsApp to allow RIL's eCommerce business users to use the WhatsApp platform.

Stating that the investment is credit positive, Moody's 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.

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.

Fitch said it had in August last year revised the outlook on RIL's 'BBB' rating to 'positive' and may upgrade to 'BBB+' if net adjusted debt/EBITDA ratio improves to below 1.5x on a sustained basis.

"The deal is part of RIL's plan to strengthen its businesses and to achieve a net cash position - through partnerships and supported by organic growth and low capex," it said in a statement. "We expect the partnership with Facebook to bolster RIL's consumer business in the medium term."