Reliance Industries to set up digital subsidiary with Rs 1.08 lakh cr investment; Jio to be net debt-free

The Board of Directors of Reliance Industries Ltd (RIL) on Friday (25 October) has approved the formation of a wholly-owned subsidiary for its digital initiatives with an investment of Rs 1.08 lakh crore. This will be infused through the rights issue of optionally convertible preference shares (OCPS). The subsidiary will also acquire RIL’s equity investment of Rs 65,000 crore in Jio Infocomm, bringing up Reliance’s total investment in the digital business to Rs 1.73 lakh crore.

A scheme of arrangement between Reliance Jio and certain classes of its creditors (including debenture holders) for transfer of identified liabilities of up to Rs 1.08 lakh crore to RIL | @kritika_saxena1 pic.twitter.com/GowBkIbtIN

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RIL said that RJIL board has approved a scheme of arrangement between the company and certain classes of its creditors including debenture holders for transfer of identified liabilities of up to Rs 1.08 lakh crore to RIL. “Rights Issue of Optionally Convertible Preference Shares (OCPS’) aggregating up to Rs. 1,08,000 crore for the purpose of payment of consideration for transfer of identified liabilities - WOS (wholly owned subsidiary) to subscribe to this issue,” it added. [caption id=“attachment_4402725” align=“alignleft” width=“380”]  Representational image. Reuters.[/caption] Following this arrangement, Reliance Jio will become virtually net debt-free by 31 March, 2020, with the exception of spectrum-related liabilities.  Incidentally, it will be the only telecom firm to become debt-free in that time frame. “This new company will be a truly transformational and disruptive digital services platform. It will bring together India’s Number 1 connectivity platform, leading digital app ecosystem and world’s best tech capabilities globally, to create a truly Digital Society for each Indian,” RIL Chairman and Managing Director Mukesh Ambani said. “Like global technology peers, the digital platform company with negligible leverage makes a compelling investment proposition for both strategic and financial investors, many of whom have evinced strong interest in partnering with us,” Reliance Industries said. Reliance Industries Chairman Mukesh Ambani said that the creation of a new company will help create a transformational digital services platform and help attract potential strategic partners. “We will induct the right partners in our platform company, creating and unlocking meaningful value for RIL shareholders,” Ambani added. The restructuring will ensure monetisation opportunities will accrue to shareholders effectively and there will be no impact on Reliance’s overall debt position, the company said, adding that the consolidation of liabilities in RIL will help create an efficient structure to manage debt and cash. The move can be seen as RIL’s ambition to catapult Jio into the same league as global digital powerhouses such as Alphabet (parent company of Google) and China’s Tencent. Ambani had announced at the Reliance Industries AGM recently that the company was looking to unlock value in its telecom and retail ventures (Reliance Retail) by inducting partners, and was looking to list them in the next five years. Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Firstpost