Reliance to set up Rs 1.08 lakh crore digital unit for a debt-free Jio

India’s top corporate house Reliance Industries Ltd (RIL) has said on Friday that it would invest nearly Rs 1.08 lakh crore to set up a new digital services subsidiary in a bid to reduce the debt significantly from its telecom venture Reliance Jio Infocomm Limited (Jio). The investment will be infused through the rights issue of optionally convertible preference shares (OCPS).

Upon its inception in 2016, RJIL’s move of offering free voice calls and data at dirt cheap prices to build a massive customer base has led to a significant rise in the debt burden of RIL. It also led to a price war between rivals to accommodate the prices of Jio or perish, which drove many competitors to file bankruptcy such as Anil Ambani’s Reliance Communications and Aircel. The investment in the new wholly-owned subsidiary (WOS) is a strategy to make the telecom venture debt free by making way for strategic investors.

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Jio to become virtually net debt-free by March 2020

RIL will have the rights to convert its Rs 1.08 lakh crore ($15.26 billion) investment in the new WOS into equity and the WOS will, in turn, invest it into Jio, making the telecom venture almost net debt-free (excluding spectrum liabilities) by the end of March 2020.

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The company said in a statement that the new structure will offer a compelling investment opportunity to strategic and financial investors, many of whom have indicated strong interest in a partnership. The statement added that WOS will be the largest digital services platform in India.

The new digital company which will include several of Jio's offerings such as MyJio, JioTV, JioCinema, JioNews, and JioSaavn, will also acquire the RIL's equity investment of Rs 65,000 crores in Jio. "This new company will be a truly transformational and disruptive digital services platform. It will bring together India's Number one connectivity platform, leading digital app ecosystem and world's best tech capabilities globally, to create a truly Digital Society for each Indian," RIL Chairman and Managing Director Mukesh Ambani said.

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