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Last Updated : Oct 25, 2019 11:33 PM IST | Source: Moneycontrol.com

Jio becoming net debt-free unlocks value, paves way for listing of digital business: Experts

This could be a precursor to the listing of this digital platform eventually, Deven Choksey said.

Reliance Industries said today that it would float a new subsidiary to hold its digital businesses, including Jio, and infuse Rs 1.08 lakh crore to make Jio net debt-free.

The company added that the investment would be in the form of a rights issue of optionally convertible preference shares (OCPS), which the new subsidiary will use to reduce Jio's debt.

Following this arrangement, Reliance Jio will become virtually net debt-free by March 31, 2020, with the exception of spectrum-related liabilities.

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"This could be a precursor to the listing of this digital platform eventually, which could probably comprise various verticals including retail, healthcare, entertainment, etc," Deven Choksey of KR Choksey told CNBC-TV18. "So, this appears to be a smart move wherein the shareholders of Reliance can now see the unlocking of valuation of the businesses that they have built."

In the company statement, Reliance Industries Chairman Mukesh Ambani said that "given the reach and scale of our digital ecosystem, we have received strong interest from potential strategic partners. We will induct the right partners in our platform company, creating and unlocking meaningful value for RIL shareholders.”

Choksey added that the restructuring "could be beginning of setting up of the digital ecosystem across many verticals such as healthcare, education and the unlocking of value of consumer-facing business in the future.”

“I think this is an excellent move that will pave the way for better price discovery,” said market expert Prakash Diwan. “At first glance, it seems the move is a fair one and will not be disadvantageous to the minority shareholders.”

Diwan added that a light balance sheet will help the digital business move towards listing.

The induction of a strategic partner into the digital business or a potential listing would also help Reliance Industries achieve its own goal of becoming a net debt free company by March 2021.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

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First Published on Oct 25, 2019 10:17 pm
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