In its sixth major stake sale announcement in under six weeks, Reliance Industries Ltd(RIL) has sold 1.85 per cent in Jio Platforms (its digital business holding company) for about ₹9,094 crore to Mubadala, Abu Dhabi’s sovereign investor.

Prior to this, since end-April, RIL had sold about 17.1 per cent in Jio Platforms for nearly ₹78,562 crore to marquee technology players and investors – Facebook, Silver Lake, Vista Equity Partners, General Atlantic and KKR.

The Mubadala deal pegs Jio Platforms’ equity value at ₹4.91-lakh crore and its enterprise value at ₹5.16-lakh crore — the same as implied by the previous four stake sale deals, and a premium of about 12.5 per cent equity value as implied by the Facebook deal.

IPO possibility

With the Mubadala deal, RIL has now sold about 19 per cent in Jio Platforms for about ₹87,655 crore. There could be more deals on the cards. Reports suggest that Microsoft and the Saudi sovereign wealth fund are also looking to buy stake in Jio Platforms. All this seems to be prepping the ground for a possible initial public offering (IPO) of Jio Platforms that reports say could be done on foreign bourses such as the Nasdaq. In this context, the Centre’s recent announcement of allowing Indian companies to list directly overseas holds significance.

RIL has been able to get top-dollar for its stake sales in Jio Platforms. The Facebook deal valuation was 10-15 per cent higher than what many analysts were earlier estimating, and the subsequent deals are at about 12.5 per cent higher equity valuation compared with the Facebook deal. The valuation in a possible IPO on foreign bourses could get another lift-up, with many marquee global investors already on board and technology companies getting premium valuation in overseas markets.

The deals in Jio Platforms have been a key reason for the sharp rally in the RIL stock from March lows. The successful completion of the ₹53,124-crore rights issue has also helped; the stock has recouped almost all its losses and is now again close to its all-time peak. The market seems confident about RIL’s plan to become net debt-free within a year, thanks to the rapid fund-raising over the past couple of months. The company’s net debt (debt less cash) as on March 2020 was about ₹1.6-lakh crore. The company’s debt-to-equity ratio as of March 2020 was 0.74 times.

Three-cornered fight?

It is also significant that while RIL has been successfully selling off stake in Jio Platforms, its rivals in the telecom and digital business — Bharti Airtel and Vodafone Idea — also seem to be making their fund-raising moves. Amazon is said to be in talks to pick up a 5 per cent stake in Bharti Airtel for $2 billion. This suggests an equity valuation of Bharti Airtel of about ₹3-lakh crore, close to its current market capitalisation of ₹3.19-lakh crore. That’s a discount of about 35 per cent to Jio Platforms’ equity value of about ₹4.9-lakh crore, implied by the recent stake sale deals.

Google is also reported to be in talks with the beleaguered Vodafone-Idea to pick up a 5 per cent stake. A three-cornered fight among the Indian telecom and digital biggies, each backed by global tech titans with big financial muscle, could well be on the cards.

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Published on June 5, 2020