InvestorQ : How is Reliance restructuring its Jio business and what will now happen to RIL and to Jio? Will they become separate companies?
Arti Chavan made post

How is Reliance restructuring its Jio business and what will now happen to RIL and to Jio? Will they become separate companies?

Answer
image
3 years ago
Follow

The whole idea of the restructuring is to help reduce the debt burden on the books of Reliance Jio. By the time the planned restructuring of Reliance Jio is completed, the company will be almost debt free. Here is why it is important. For a long time, investors in RIL have been worried as to how the debt of Jio will be handled and how the capital investment of $30 billion will be amortized. Now, there appear to be some answers to this question. Here is how RIL plans to go about it.

The restructuring will essentially be done by forming a digital subsidiary encompassing all the digital businesses of the RIL group, including Jio. The first step in this case will be that RIL will form a digital subsidiary with a capital infusion of Rs.108,000 crore. The subsidiary, in turn, will acquire RIL’s equity invested in Reliance Jio for Rs.65,000 crore. The Rs.108,000 crore that RIL will invest in the digital subsidiary will be via issue of optionally convertible preference shares (OCPS). Once the deal is completed, Reliance Jio will become completely debt free. In fact, the only debt that will be left in the books of Jio will be the spectrum related liabilities payable to the government.

This deal needs to be seen in the light of the recent efforts to transfer Jio assets to an INVIT structure back in March 2019. Back then, Jio had shifted assets like digital connectivity platform, tower assets and other infrastructure assets worth Rs.125,000 crore to an infrastructure investment trust (INVIT) so as to make the company asset light. Now this latest move will also make the telecom and digital business extremely light on debt and on assets. Jio will have a balance sheet of just about Rs.240,000 crore. We need to await more details from the company on this restructuring.

53 Views