Highlights:
Reliance Jio Infocomm Ltd.(RJIL) will do rights issue of Optionally Convertible Preference Shares for Rs.1,08,000 cr for transfer of liabilities. This will be an additional to current equity of Rs.65,000cr totaling the equity of Rs. 1,73,000cr.
This level of equity infusion will make RJIL net debt free by March 2020.
The proposed entity will be holding all digital platforms and further development initiates.
This will not impact the current shareholding or consolidated debt along with credit profile of RIL standalone.
Cash and Current Investments of RIL standalone as on September 2019 is at Rs. 81,412cr.
This is being done to bring RJIL at level of Global Technology Peers and get more attractive for any strategic or financial investor.
Quick Analysis:
This is positive step for company and shareholders as it is an important step that was required to bring a strategic or financial investor for the Digital Platform along with higher value given the potential and audience it serves.
Though the net debt to be raised at RIL for this transaction is unclear we expect it not hamper the credit profile of the standalone company as the capex reduction has already increased the cash flow and will give more deleverage scope once stake sale is finalised.