RIL aims to cut debt through Jio optic fiber InvIT

Get instant Data on loan in emergencies and pay later

Nitin Agrawal Moneycontrol Research

In order to pare the debt, Reliance Industries (RIL) through Reliance Jio Infocomm Ltd (RJIL) has proposed the idea of transferring its fibre and its tower undertaking to separate companies, through a scheme of arrangement, which could be through sale and leaseback or infrastructure investment trust (InvIT).

Demerger of fibre and its tower undertaking

The objective of this demerger is to take fibre and tower asset off the balance sheet which would lead to taking off liabilities associated with them which would make Jio asset-light. This would strengthen the financials position of the company and would give flexibility to take future investments without putting too much pressure on the balance sheet.

Debt and capex situation

RIL incurred net capex of Rs 27,300 crore in Q3 FY19 of which Rs14,000 crore is associated with RJio.  Its net debt increased to Rs2,98,000 crore in Q3 FY19, up from Rs2,35,000 crore at the end of FY18. In fact, RJio’s balance sheet size also ballooned to Rs3,00,000 crore in Q3 FY19 from Rs2,54,000 crore at the end of FY18.

RJio’s interest expense also swelled to Rs1,019 crore in Q3 FY19, from Rs 663.8 crore in the same quarter last year, hurting the bottom-line for the company. On a consolidated level, RIL’s total debt to equity stood at 0.75 at the end of FY18.

Jio’s market position

Jio continues to outperform industry and added 8.6 million subscribers in the month of December 2018 and currently has 280 million active subscriber base. Further, on the back of its competitive pricing strategy, Jio continues to gain market share and reduced the market share gap with the incumbents. Its market share reached 23.8 percent in the month of December 2018.

Further, despite strong competition and offers, Jio’s ARPU (average revenue per user) witnessed a marginal dip of 2.1 percent on QoQ basis and came at Rs131.7 per month at the end of Q3 FY19, much better than its peers.

Follow @NitinAgrawal65

For more research articles, visit our Moneycontrol Research page.

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