With the latest deal, Jio Platforms has now raised a combined Rs 78,562 crore over the past month
Jio Platforms aims to raise Platform 11,367 crore by selling 2.32% stake to private equity firm KKR, making it the fifth investment in a month in the digital business unit of Reliance Industries Ltd.
"The transaction relies on Jio Platforms Platform as equity value of 4.91 lakh crore and enterprise value of ₹ 5.16 lakh crore. This is KKR's largest investment in Asia and will be converted into a 2.32% equity stake in Jio platforms on a fully diluted basis," RIL said in a release on Friday.
ET had reported KKR's possible investment in Jio Platforms on May 21. Shares of RIL ended 0.6% lower at ₹1,431.60 on the BSE, in line with the Sensex, which fell by 0.8%.
With the latest deal, Jio Platforms was combined by five investors - Facebook, private equity fund Silver Lake, Vista Equity Partners, General Atlantic and now KKR - for a 17.12% stake. 78,562 crore. Analysts say that RIL may dilute its stake, keeping minority investors ahead by 20-25% and in the process will seek to achieve a zero-debt target beyond its March 2021 target.
At the end of the March quarter, RIL had outstanding debt of Rs 3.36 lakh crore. It also had cash in hand of Rs 1.75 lakh crore, bringing the net debt position to Rs 1.61 lakh crore.
Saudi sovereign fund PIF is said to be closing in on a stake purchase in Jio Platforms. RIL is also believed to be engaged in talks with other including Mubadala, the United Arab Emirates sovereign wealth fund, ET has reported.
The RIL unit comprises mostly telecom businesses under Reliance Jio Infocomm, the largest in the country with over 38 million subscribers. Other digital properties and investments of Reliance Industries Ltd such as Jio Cinema, Jio Saavn and Haaptik are placed in Jio Platforms.
"We are looking forward to leveraging KKR's global platform, industry knowledge and operational expertise to advance JK," RIL Chairman Mukesh Ambani said in a statement.
KKR is making the investment from its Asia private equity and growth technology funds.
"We are investing behind Jio Platforms' impressive momentum, world-class innovation and strong leadership team, and we see this historic investment as a strong indicator of KKR's commitment to support leading technology companies in India and Asia Pacific," KKR cofounder Henry Kravis said in the statement.
Founded in 1976, KKR's worldwide investments include BMC Software, ByteDance and GoJek through its private equity and technology growth funds. So far, it has invested more than $30 billion in total enterprise value in tech companies.
KKR has been investing in India since 2006. Interestingly, the private equity chief has previously endorsed Sunil Mittal's Bharti Infratel, the tower unit of Bharti Airtel, the main rival of Reliance Jio. In 2017, KKR bought a 10.3% stake in Infra-tel with one of its major sponsors, CPPIB.
The latest transaction is subject to regulatory and other customary approvals, RIL said. Analysts said all the deals entail a fresh issue of equity shares in Jio Platforms, which means any tax incidence is unlikely and the approval process should be relatively quick.
"In days of uncertainty, investors seem to regard an investment in Jio as promising and low risk. This will reduce Jio's debt and improve its competitiveness in market place," said Mahesh Uppal, director at Com First, a telecoms think tank. "Coming at a time of RIL's rights issue can only do it good by nudging other investors."
Reliance Industries Ltd aims to raise Rs 53,125 crore through its rights issue - India's biggest and the first such by the firm in nearly three decades. It opened on May 20 and will close on June 3.
Before KKR, General Atlantic said it will buy 1.34% stake in Jio Platforms for Rs 6,598.38 crore, Vista Equity Partners a 2.32% stake for Rs 11,367 crore and Silver Lake 1.15% for Rs 5,655.75 crore. Facebook kicked off the sequence April 22, saying it would invest $5.7 billion for a 9.99% stake.
These investments "should reposition Jio as a major tech player rather than just a telecom service provider," CLSA said in a report.
Ratings agency Moody's added that these divestment's were 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. "...Proceeds from these divestment's alone will help the company pare around 49% of its net debt of Rs 1.6 trillion ($21.4 billion) outstanding as of 31 March 2020."
In two years of fundraising, Hope comes ahead of a planned IPO for Jio. RIL has talked of making Jio Platforms a digital platform in the last 6-12 months on the lines of US leading Alphabet and technology giant Tencenti.
"Diverse marquee investors are becoming long-term shareholders of JPL because of a unique set of technologies and platforms under one entity. There are no similar opportunities available anywhere else globally. And an endorsement of the quality of the management," Reliance Industries Ltd said.
Morgan Stanley acted as financial advisor to Reliance Industries and AZB & Partners and Davis Polk & Wardwell acted as legal consultants. Deloitte Touche Tohmatsu India LLP was the financial advisor to KKR. Shardul Amarchand Mangaldas & Co. and Simpson Thatcher & Bartlett LLP were legal advisors to KKR.
Reliance Industries Ltd is also in talks to sell a fifth of its oil-to-chemicals business to Saudi Arabamco in a $ 15 billion deal and sold its telecommunications tower business to BP plc for Rs 7,000 crore to Brookfield for Rs 25,200 is. Crore.
Some analysts say a steep drop in global oil prices this year and a decrease in demand in most global economies could make an Aramco deal difficult. The Brookfield transaction has not yet received government approval.
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