Barely three months after reporting a net debt of some USD 21 billion, India's billionaire businessman Mukesh Ambani-owned oil-to-telecom conglomerate Reliance Industries announced its debt-free status in June this year -- all thanks to an unprecedented fundraising spree that helped cheer up the country's bourses amid Covid.
Reliance had, in fact, raised USD 15.2 billion by selling stakes in its telecom unit Jio and another USD 7 billion through rights issue just in the first quarter of this fiscal that saw the shares of the conglomerate hitting an all-time high and helped both the benchmark indices, Nifty and Sensex, shrug off weak global cues during the Covid-induced slowdown.
“I am both delighted and humbled to announce that we have fulfilled our promise to the shareholders by making Reliance net debt-free much before our original schedule of March 31, 2021," Ambani, the chairman and managing director of Reliance Industries, had said at the virtual shareholders' meet in July, while announcing the first quarter results.
But the haste at which Ambani had signed of the back-to-back deals with some US-based firms between April and June -- which also fuelled Reliance's market capitalisation to cross USD 150 billion, the first Indian company to reach this milestone -- can be attributed to its "hard efforts" to list Jio as a separate digital company on the country's bourses next year.
Jio has attracted some 370 million subscribers to its network since its mega launch in 2016, despite being a late entrant to India's telecom sector. By offering free voice calls and data at the world's cheapest price, it has already changed the country's digital landscape that was earlier dominated by the duopolies of domestic Airtel and British MNC Vodafone.
UNB has learnt that the top management of Reliance Industries is aggressively planning to take Jio public in the second half of the next fiscal, given the fact that the parent company has already managed to cut its net debt to zero. "By that time, the proceeds from the rights issue will be entirely received from retail and institutional investors," sources said.
The rights issue was structured in such a way that investors paid only 25% of the value of the shares they applied for, while they would have to cough up the remaining in two equal instalments in the first quarter of the next fiscal. "So, once all the funds are in, time will be right for Reliance to take Jio public as a separate entity," the sources said.
Reliance Industries has traditionally been in the oil and gas sector and chemicals business, both highly cyclical as compared to the defensive consumer and digital plays. And experts say the idea behind taking Jio public stems out of the fact that the pandemic has increased digital adoption across the world, including in India.
"Over the years, Reliance has become a conglomerate by diversifying into telecom and retail businesses, which have turned the tide for the company. In fact, the consumer-facing businesses now contribute nearly 35% of its operating profit. By listing Jio, Ambani wants to cash in on the growing digital dependence," said Delhi-based economist Nayana Singhal.
Stocks like Amazon, Netflix, Apple, Facebook, Google have all seen strong buying interest due to their digital capabilities and lower impact on the business during the Covid pandemic.
Some of these tech titans have also invested in Jio platforms, between April 22 and May 8, notable among them being Facebook. The social networking giant has become the Indian conglomerate's largest minority shareholder, with a 9.99 per cent stake, by investing USD 5.7 billion in Reliance.
"Also, talks are ongoing between Reliance and Saudi Aramco over the latter's USD 15 billion investment. All these indicate that we would see Jio on the country's bourses in the next fiscal. Moreover, being the cheapest data seller in India, Jio could well dislodge the other two telecom companies," said Ajai Misra, a telecom veteran based in Delhi.
India has the cheapest mobile broadband prices in the world. As per an international study, users in India pay USD 0.26 for 1 gigabyte (GB) of mobile data as compared with USD 12.37 in the US, USD 6.66 in the UK, and a global average of USD 8.53.
Leading consulting firm PricewaterhouseCoopers estimates the number of internet users in India is likely to grow to 850 million in 2022. So, if Jio, said to be the cheapest data seller in the world, becomes public next year, it could well change the dynamics of the telecom sector in the Indian equity indices too, say experts.
"India is one of the world's largest telecom markets. But neither Vodafone nor Airtel is in a good financial position, grappling with financial constraints to cough up AGR or adjusted gross revenue dues to the government. Jio, on the other hand, being a late entrant is more or less saved from paying huge AGR dues. It's a win-win for Jio," Misra said.
It may also be mentioned here that Reliance is already in talks with a number of fast moving consumer goods companies in this country to deliver daily-use domestic essentials at the doorsteps of consumers via Jio's e-commerce venture JioMart. Facebook's chat service WhatsApp has tied up with JioMart to make consumers connect with local groceries.