RJIL is now asset light, set to be net debt free and an attractive destination for potential investors
The latest restructuring of the digital businesses of Reliance Industries will see its telecom arm - Reliance Jio Infocomm (RJIL) - reap multiple benefits.
The board of RIL October 25 approved the formation of a wholly-owned subsidiary for its digital businesses and the infusion of Rs 1.08 lakh crore in it.
The deal will make RJIL a net-debt free company by March 31, 2020.
This is because the board of RJIL approved a scheme of arrangement between the company and certain classes of its creditors, including debenture holders, that will transfer identified liabilities of up to Rs 1.08 lakh crore to RIL.
Consequently, the newly formed wholly-owned subsidiary will subscribe to a rights issue of Optionally Convertible Preference Shares (OCPS) aggregating up to the same amount - Rs 1.08 lakh crore.
After the transaction, RJIL will become virtually net debt-free company by the end of this fiscal. Only the spectrum-related liabilities will remain.
The latest move comes after RJIL's core digital connectivity platform, tower and fiber passive infrastructure assets of approximately Rs 1.25 lakh crore were demerged in March 2019, to Infrastructure Investment Trusts (InvITs).
Following this demerger, RJIL became asset-light having a balance sheet size of Rs 2.37 lakh crore.
The twin restructuring exercise now gives the 4G-based telecom operator, which has 35.5 crore subscribers, enough room to expand and possibly boost its 5G ambitions.
And also, this helps it open gates to more investors. Already, after the March move, the company got an investor in the form of Brookfield Asset Management, which agreed to acquire the tower business through an infusion of Rs 25,215 crore.
More such announcements can now be expected.
The digital push, now with the newly formed wholly-owned subsidiary, will add teeth to RJIL's offering.Disclosure: Moneycontrol is published by Network18, which is owned by Reliance Industries.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.