Mukesh Ambani-led Reliance Industries Limited (RIL) on Monday said that US-based private equity firm Silver Lake will buy 1.15% stake in Jio Platforms for Rs 5,655.75 crore (US$747 million). The new deal follows Facebook’s deal with Jio Platforms where the social network major is buying a 9.99% stake in for Rs 43,574 crore (US$5.7 billion).
The oil-retail-telecom conglomerate said that this new investment values Jio Platforms at an equity value of Rs 4.90 lakh crore (US$65.3 billion) and an enterprise value of Rs 5.15 lakh crore (US$68.7 billion) and represents a 12.5% premium to the equity valuation of the Facebook investment announced on April 22, 2020.
“I am delighted to welcome Silver Lake as a valued partner in continuing to grow and transform the Indian digital ecosystem for the benefit of all Indians. Silver Lake has an outstanding record of being a valuable partner for leading technology companies globally,” Mukesh Ambani, Chairman and Managing Director, Reliance Industries Ltd, said in a statement.
RIL had last year restructured its digital business into one consolidated wholly-owned subsidiary – Jio Platforms – which houses all digital initiatives, including applications, tech initiatives, and connectivity services like mobile and broadband.
After the Facebook deal, RIL had on April 30 said that Jio Platforms received interest from other global investors for similar-sized additional stake.
The company’s deputy chief financial officer, V Srikanth, during an analyst call on April 30, said that the amount Jio Payments received from Facebook was 50% of the targeted value, implying that another 10% stake sale was on the cards.
“…while the US$746 million investment is positive, the size is relatively small versus the US$5.7 billion investment announced by Facebook and hence investors would like to see more investments into Jio Platforms,” J.P Morgan said in a note on Monday.
Silver Late has around US$40 billion in combined assets under management and committed capital. Its investments have included Airbnb, Alibaba, Ant Financial, Alphabet’s Verily and Waymo units, Dell Technologies, Twitter and numerous other global technology leaders.
Egon Durban, Silver Lake Co-CEO and Managing Partner said,”…the the market potential they [Jio Platforms] are addressing is enormous, and we are honoured and pleased to have been invited to partner with Mukesh Ambani and the team at Reliance and Jio to help further the Jio mission.”
RIL and Jio Platforms in a joint statement said that the partnership with Silver Lake has special significance in the wake of the severe economic disruptions caused by the COVID-19 pandemic, globally and especially within India.
“Silver Lake’s Rs 5,655.75 crore (US$746 million) investment in Jio Platforms further illustrates Reliance Industries Limited’s (RI, Baa2 stable) ability and willingness to monetize its digital services business and reinforces the company’s commitment to achieving a zero net debt position by 31 March 2021,” Vikas Halan, Senior Vice President, Corporate Finance, Moody’s Investors Service said in a separate statement.
Halan said that the investment by Silver Lake was priced at a premium to recently announced investment by Facebook Inc and has established another pricing benchmark for Jio Platforms.
As per Moody’s, these investments along with the recently announced rights issue worth US$7 billion could help RIL’s reduce net debt by about US$13.6 billion from reported net debt of US$21.4 billion as on 31 March 2020.