- The market value of Reliance Jio is expected to be between $60-65 billion after the restructuring in which parent Reliance Industries Ltd has taken up almost all of its debt.
- Reliance Industries had previously announced that it would sell a 20% stake in its oil-to-chemicals business to Saudi Aramco at $75 billion, making it one of the country’s largest foreign direct investment (FDI) deal.
The market value of Reliance Jio is expected to be between $60-65 billion after the restructuring in which parent Reliance Industries Ltd has taken up almost all of its debt. Analysts said this would help Reliance get into the telecom project as a strategic partner.
“This addresses the issues arising from any potential subsidization of the Oil 2 Chemical (O2C) entity as and when the proposed sale of the Saudi stake takes place,” said JP Morgan’s research report. “In our view, if we see a strategic partner taking a meaningful (over 20 percent) stake in these EV valuations, the key positive would be.”
Reliance Industries had previously announced that it would sell a 20% stake in its oil-to-chemicals business to Saudi Aramco at $75 billion, making it one of the country’s largest foreign direct investment (FDI) deal.
There were some questions about this contract, however. Analysts said the move to make Jio debt-free would help RIL get a better value for the telecommunications company, which in effect would serve as a buffer if the agreement with Aramco was postponed or renegotiated.
“Some investors have recently expressed concern about a scenario where the RIL-Aramco transaction is not concluded within the timeframe announced.
We believe that such a risk is now well balanced by the prospect of an alternative deal in its digital platform, “analysts at HSBC said.
RIL announced on October 25 that it will create a wholly-owned subsidiary in which it will combine its entire telecom (Jio) and digital enterprises/investments.
RIL has positioned this new structure as India’s largest digital services platform agency, hosting both connectivity (Jio) and other digital infrastructure investments (various apps and software capabilities). RIL claims it can leverage its subscriber base to build one of the world’s most important digital service platforms.
But the reorganization is not changing anything for now for RIL investors. “The reorg has no implications for RIL’s unchanged combined net debt, with Jio’s net debt lower and correspondingly higher standalone net debt. Jio’s net debt is better positioned to meet this debt due to stable cash flows per mgmt. This also has no implications for investors as there is no effective change in RIL’s ownership of its virtual enterprises,” said Citi’s research report.
