Reliance selling 17 pc stake in Jio Platforms in 1 month to help pare half its net debt: Moody's

Reliance Industries selling over 17 per cent stake in its digital unit Jio Platforms for a combined Rs 78,562 crore in one month will help pare about half of its net debt of Rs 1.61 lakh crore, Moody's Investors Service said on Friday.

The credit rating agen the comment on a day when Reliance announced sale of 2.32 per cent stake in Jio Platforms to global investment firm KKR & Co. Inc for Rs 11,367 crore -- the fifth deal in four weeks that will inject a combined Rs 78,562 crore in the oil-to-telecom conglomerate to help it pare debt.

"Proceeds from these divestments alone will help the company pare around 49 per cent of its net debt of Rs 1.61 lakh crore outstanding as of March 31, 2020," Moody's said in an issuer note.

Exactly a month back, Facebook picked up 9.99 per cent stake in the firm that houses India's youngest but largest telecom company for Rs 43,574 crore.

Within days of that deal, Silver Lake -- the world's largest tech investor -- bought 1.15 per cent stake in Jio Platforms for Rs 5,665.75 crore.

On May 8, US-based Vista Equity Partners bought 2.32 per cent stake in Jio Platforms for Rs 11,367 crore and on May 17 global equity firm General Atlantic picked up 1.34 per cent stake for Rs 6,598.38 crore.

"These divestments are credit positive because proceeds from sales of the stakes will be used for debt reduction and bring the company closer to its target of reducing its net debt to zero by March 2021," Moody's said.

All the transactions are currently underway and subject to regulatory and other approvals.

"Successful completion of the transactions will help to alleviate the negative impact of lower earnings caused by disruptions from the coronavirus outbreak," it added.

The rating agency expects a 16-17 per cent drop in Reliance's consolidated EBITDA for the fiscal year ending March 31, 2021, compared to fiscal 2020.

While EBITDA for the company's digital services segment will continue to grow during the coronavirus outbreak, it expects EBITDA for the refining and petrochemical segments to be weaker as a standstill in global travel and slowdown in economic activity will weaken the demand for transportation fuel and petrochemicals.

"As a result, we expect RIL's leverage, as measured by adjusted net debt/EBITDA, to remain appropriately positioned for its current rating," it said.

Other steps taken by the company to reduce its net debt to zero include the partial divestment of its oil-to-chemical business (USD 15 billion) and fuel retailing business (USD 1 billion) to Saudi Aramco and BP Plc, respectively.

In addition, Reliance hanced a rights issue offering to raise around Rs 53,215 crore and use the proceeds toward debt reduction, it added.