SUMMARY
Jio will issue 4 Bn non-cumulative optionally convertible preference shares to RIL at INR 50 each for cash
As of 31 March, RIL has an outstanding debt of more than INR 2.87 Tn
Jio will put the infusion towards expanding its broadband and ecommerce plays
In a move to fuel Reliance Jio’s broadband and ecommerce plays and make way for 5G services in the future, Reliance Industries Ltd (RIL) is planning to invest INR 20K Cr in its telecom business.
According to a Mint report, Reliance Jio Infocomm will issue 4 Bn non-cumulative optionally convertible preference shares to its parent at INR 50 each for cash.
The report quoted anonymous sources who said that the capital would be used to expand operations of Reliance Jio, which is the fulcrum of Reliance’s offline-to-online model for ecommerce. The non-cumulative optionally convertible preference shares carry an interest rate of 9%.
An analyst at a domestic brokerage firm told Mint that in order to upgrade the infrastructure and provide 5G services, the capital requirement for the telecom sector will stay high. Jio is now looking at expanding to home and mobility services along with GigaFiber fixed-broadband services.
Jio has been continually investing to expand its services. As of 31 March, RIL has an outstanding debt of more than INR 2.87 Tn, increasing by INR 69K Cr during the year due to investments in Jio. On the other hand, the cash reserves at RIL’s hands stands at about INR 1.44 Tn.
The report stated that to cut the debt away, the company has decided to transfer its fibre and tower segments to two infrastructure investment trusts, namely Digital Fibre Infrastructure Trust and Tower Infrastructure Trust. The transfer is said to help Jio reduce its debt and go light on its assets.
Jio’s Growth And The Ecommerce Market
The 2019 Mary Meeker report on Internet Trends has noted Jio as one of the most innovative internet companies based outside the US. The report has focussed on how the company has been trying to expand into hybrid ecommerce by offering a digital shopping experience and connecting customers at thousands of Jio retail stores around the country. The report also added that the company’s offering of free voice call and cheap data plans have helped double data usage in a year — back in 2016, the company had set a record by attracting 16 Mn subscribers in the first month of its launch.
“We are creating a hybrid, online-to-offline commerce platform by integrating Reliance Retail’s physical marketplace with Jio’s digital infrastructure and services.” Reliance’s chairman Mukesh Ambani had said about its approach to ecommerce.
Presently, the Indian ecommerce market is largely dominated by global ecommerce major Amazon and Walmart-owned Flipkart.
Reliance has also been looking at expanding its operations in India’s fintech sector by introducing Point of Sale (PoS) devices for retail outlets. This could also be part of the company’s ecommerce offering. The company is partnering with Hindustan Unilever to acquire merchants on its platform.
