Hyderabad: Intel Capital became the latest investor in Reliance Industries’ wholly-owned subsidiary Jio platforms, which will invest Rs 1,894.50 crore at an equity value of Rs 4.91 lakh crore and an enterprise value of Rs 5.16 lakh crore. The company joins the list of marquee firms, which have recently invested in Jio Platforms, taking the total investment to Rs 1,17,588.45 crore through 12 deals in over two months, by selling 25.09 per cent stake. The capital raised has no precedence globally in such a short span of time.
What makes it unique and distinct is this being achieved amidst a global lockdown caused by the Covid-19 pandemic, experts note. Jio Platforms has raised investments from global investors including Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG, L Catterton, PIF and Intel since April 22, 2020.
In addition to these global investments, the company’s recent Rights Issue raised Rs 53,124.20 crore. The Rights Issue, which was subscribed 1.59 times, is not only the largest ever in India, but also the largest in the world by a non-financial entity in the last decade. With these investments, RIL has become net debt-free. The company’s net-debt was Rs 1,61,035 crore as on 31 March, 2020.
Jio Platforms is a next-generation technology platform focused on providing digital services across India, with more than 388 million subscribers. Brokerage firm Bernstein projects Jio’s mobile subscriber base to cross 500 million in FY23, up from 388 million in FY20. The subscriber base is expected to touch 569 million in FY25 and 609 million in FY28. Jio’s market share is expected to rise from 36 per cent in FY20 to 40 per cent in the current fiscal and to 48 per cent in FY25.
Anil K Sood, co-founder, Institute for Advanced Studies in Complex Choices (IASCC), told Telangana Today, “Primarily, it is the size of the Indian economy, changing nature of consumption and an increase in role of digital technology in all spheres of life that makes India an attractive destination for investment. While India is a lower-middle income economy in per capita terms, it is the third largest economy (purchasing power parity terms) in the world. Communication spends constitutes about two per cent of private final consumption expenditure. In addition, it is an enabler for all the economic activity. A developed economy such as the US also spends about 2.2 per cent of real personal consumption expenditure.”
At the same time, India has been experiencing increasing rates of penetration for communication and digital technology. India is one the largest users of key digital platforms globally with about 120 million online shoppers and growing. In addition, the Indian businesses will continue to adopt digital technology as the economy grows.
Sood added, “Consequently, we expect communication business to grow faster than rest of the economy. During the last few years (2011-12 to 2017-18) communication sector’s real GVA (gross value added) grew by 7.4 per cent, compared to the aggregate growth in GVA of 6.9 per cent. Gross capital formation in the communication sector grew nearly 3x that of the economy. All of this when the sector had been going through a difficult period.”
Given the existing base of customers and the potential for growth, it is not surprising that the international investors are keen to invest in India. Covid-19 has also slowed down capital formation globally and if an Indian entrepreneur demonstrates the ability and willingness to invest at this stage of economic cycle, it becomes a win-win situation for the investor and the Indian firms.
Reliance has built the core infrastructure using borrowings and it needs equity for the next phase of growth. If it does not raise sufficient equity now, it will end up compromising its ability to grow. Reliance will need additional equity for its consumer business, as it does not have the experience of building a consumer business from scratch.
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