KOLKATA: Reliance Jio Infocomm has transferred control of its fibre and tower arms to two infrastructure investment trusts (InvITs) – Digital Fibre Infrastructure Trust and Tower Infrastructure Trust — set up by a wholly-owned unit of Reliance Industries (RIL), with the aim of deleveraging its balance sheet.
Digital Fibre Infrastructure Trust and Tower Infrastructure Trust have acquired 51% stakes each in Jio’s fibre and tower units – Jio Digital Fibre Pvt Ltd (JDFPL) and Reliance Jio Infratel Pvt Ltd (RJIPL), respectively – for considerations of Rs 262.65 crore and Rs 109.65 crore respectively, RIL said in a regulatory filing late Monday night.
JDFPL and RJIPL have also allotted Rs 500 crore and Rs 200 crore worth of shares to the shareholders of Jio, respectively, RIL said. Jio is also a wholly-owned unit of RIL.
“The above transactions do not fall within related party transactions and none of RIL’s promoter/ promoter group/group companies have any interest in the transaction,” RIL said in the filing. It added that the scheme of arrangement “will result in significant deleveraging of the consolidated balance sheet of the Company as at 31st March 2019.”
Mukesh Ambani-led Jio had previously stated plans to monetise its fibre and tower assets via the sale and leaseback, or InvIT structure, to help pare its debt.
The Securities & Exchange Board of India (Sebi) has registered both trusts as InvITs. The trusts have been set up by Reliance Industrial Investments and Holdings Ltd (RIIHL), a wholly-owned arm of RIL as sponsor.
RIL shares closed 0.22% lower at Rs 1,388.45 on BSE on Tuesday.
Analysts at CLSA had recently pegged Jio’s net debt at Rs 1,12,100 crore (including Rs 21,100 crore spectrum liabilities due to the government) in the quarter ended December, giving it a debt to Ebitda ratio of 7 times. The global brokerage had said Jio was likely to close a deal within the first half of calendar 2019 to monetise its tower and fibre assets, which would deleverage a big chunk of its (overall) debt and make it asset light.
Canada’s Brookfield is reportedly expected to buy into Reliance Jio Infratel. A separate ET report last month had said global pension and sovereign wealth funds and long-only infrastructure-focussed financial investors had also been sounded out amid Jio’s efforts to monetise its pan-India optic fibre assets to deleverage its balance sheet.
Last month, Jio had received approval from the company law tribunal to hive off its fibre and tower businesses into two separate units.
Jio operates 2,20,000 towers and over 3,00,000 route kilometres of fibre. At present, it is the key tenant of the fibre backbone but in the future, may lease out the pipe to others as well. Incremental capex related to network infrastructure will also be made by the InvIT, which will reduce Jio’s capex intensity, and strengthen its balance sheet.
Jio’s competitors are also following a similar strategy. Bharti Airtel and Vodafone Idea too have separated or are in the process of separating their fibre assets, with an eye to monetising them in the future.
In fact, Sunil Mittal-led Bharti Airtel is in talks with Vodafone Idea to create a fibre joint venture similar to their co-owned tower company, Indus Towers, which could likely bring in a strategic investor in some time.