Giving further boost to its telecom business, Reliance Industries plans to make a further investment of Rs 20,000 crore in Reliance Jio Infocomm Ltd. The amount will be brought in through 4 billion non-cumulative optionally convertible preference shares by Reliance Jio to its parent at Rs 50 each. These instruments will earn RIL an interest of 9% per annum. Jioâ€™s plans for expansion into broadband, ecommerce and to launch 5G services will be funded through this investment, Mint reported.
The telecommunications sector requires constant capital infusion for technological upgradation of infrastructure. The Jio Giga Fiber broadband service is being rolled out and the ecommerce business is also expected to be launched soon. Reliance Jio wants to be ahead of the curve when it comes to the 5G wave in India. All these would need a large commitment of funds.
The Reliance group has never hesitated to borrow funds for their businesses, especially when in an expansion mode. Reliance Industries has an outstanding debt that is close to 3 trillion Indian rupees ad it is now planning to offload the debt by transferring some of the tower infrastructure assets to external entities. The amount of debt to be reduced through this process may be around Rs 910 billion.
â€śTo cut debt, Jio has decided to transfer its fibre and tower arms to two infrastructure investment trusts (InvITs)â€”Digital Fibre Infrastructure Trust and Tower Infrastructure Trustâ€”which will be offered to external investors. The transfer will help it not only reduce debt but also become an asset-light digital services company,â€ť the Mint report states.
Reliance Jio has relied on its rock bottom rates to scale up its subscriber base from zero to around 307 million in just 3 year of launch. In terms of the revenue market share, Jioâ€™s 31.7% compares very well with that of rivals Vodafone Idea (32.2%), and Airtel (27.3%).
The company has posted a revenue of Rs 11,109 crore and a net profit of Rs 2,964 crore for the year 2018-19, a huge increase over the previous yearâ€™s figures.