NEW DELHI: The aim of Reliance Industries (RIL) to make Jio debt free by transferring the liabilities of up to Rs 108,000 crore to a new entity could be a step towards listing the telecom arm at a later date and benchmarking it to the global peers.
"Large platform companies are debt free typically. Benchmarking to peers like Alphabet, Amazon, Alibaba, Facebook, Tencent and Apple," RJio said in a presentation. On the IPO issue, Jio network president Mathew Oommen had recently told IANS that the listing issue has not been discussed.
Reliance Industries MD Mukesh Ambani has said that consolidation of liabilities in the company creates an efficient structure to manage debt and cash.
It ensures monetization opportunities accrue to shareholders efficiently. Industry and investment banking sources said the deleveraging the Jio balance sheet and trying to match with tech giants like Alphabet and Alibaba are aimed at creating a brand and strong balance sheet.
Jio is already a profit making company and with its decision to go pay on voice may further add to the top and bottom line before stake sale or listing the arm for a higher valuation.
As per the Jio presentation quoting data from CapitalQ, Alphabet has a Market Cap of USD 861,202 million, total debt of USD 14,226 million and net debt of USD 106,830 million. Amazon has market cap of USD 873,429 million, USD 71,614 million total debt, USD 30,151 million net debt.
Alibaba group has a market cap of USD 442,321 million, debt of USD 20,297 million and net debt of USD 11,828 million. Facebook has a market cap of USD 520,207 million, USD 8,204 million debt and USD 40,392 million net debt.
Tencent has USD 396,730 million market cap, USD 30,817 million as total debt and net debt of USD 3,946 million. Apple Inc has a market cap of USD 1,084,422 million, total debt of USD 108,418 million and net debt of USD 102,192.
Reliance Industries has said that it would invest Rs 1.08 lakh crore through a rights issue in a wholly owned subsidiary to use the proceeds to invest in Reliance Jio Infocomm with the aim of making the telco a virtually net debt free company by March 31, 2020.
After the transaction, Jio, with over 355 million users, will have about Rs 40,000 crore of mainly spectrum-related debt on books. "RJIL (Jio) will become virtually net debt free by 31st March 2020, with the exception of spectrum-related liabilities," RIL said.
Jio's quarterly profit increased to Rs 990 crore from Rs 681 crore a year ago. The market had estimated a profit of more than Rs 1,000 crore. Profit rose 11 per cent from the preceding quarter.