Softbank investing in Jio as Mukesh Ambani deleverages business

Japan's Softbank is reportedly looking to make a USD 2-3 billion investment in India's fastest-growing telecom firm Reliance Jio as billionaire Mukesh Ambani looks to deleverage business by selling stakes.

This comes on the back of reports of Saudi giant Aramco in discussions to buy a 25 per cent stake in Reliance Industries' refining and petrochemical business for USD 10-15 billion.

"Softbank has long been seen as a potential investor in Jio," JPMorgan said in a research report. "For the past 2 years, our conversations with investors have highlighted expectations of Softbank investing in Jio and hence the news flow is not surprising."
"A potentially smaller equity sale, which although would establish a larger equity value of Jio, would not be seen as a meaningful positive, in our view," it said. "We also need to see what the potential stake sale would involve. More importantly, from a stock price perspective, we believe the potential investment would have to be an equity investment in Jio and not in the proposed InviT as that would be a quasi-debt investment."
"We think deleveraging will remain a key theme, with more asset sales likely," it said. "Strong earnings momentum, emerging signs of a strong outlook for both the telecom and retail businesses which extend beyond this decade."