India’s leading industrial group, Reliance Industries Ltd. (Reliance) announced a $1.5 billion stake sale in its digital unit, Jio Platforms Ltd. (Jio) that houses Reliance’s telecoms venture Jio Infocomm. With the completion of the third deal nearly over two weeks, Reliance has raised a combine funding of $8 billion, which will help to pay off existing debt of the conglomerate group led by billionaire tycoon Mukesh Ambani.
Third Deal with Vista
Mumbai-headquartered Reliance said in a statement on Friday, May 8, 2020, that American private equity firm, Vista Equity Partners (Vista) has agreed to buy a 2.32% stake in Jio for 113.67 billion rupees ($1.5 billion). Reliance group, which has business operations from energy to retail sectors, declared that the latest investment would make Jio to be worth of an equity value of 4.91 trillion rupees and an enterprise value of 5.16 trillion rupees.
Sources explained the deal between Reliance and Vista initiated on basis of personal connections made between the Asia’s richest man, Ambani and the private equity firm’s founder, Robert Smith. The sources added, the deal negotiations were led by Ambani’s close aide Manoj Modi and Brian Sheth, who is the co-founder of Vista and also a half-Indian whose father was born in the same place of Ambani’s home state of Gujarat.
Prior to the latest deal, Ambani’s company has signed fundraising deals with two American companies including the tech giant, Facebook.com (Facebook). On April 22, Facebook entered a deal with Reliance to buy a 9.99% stake in Jio and after some days it also secured a $750 million investment from private equity firm, Silver Lake. With these deals, Reliance has plans to sell $7 billion in new shares to meet its target of eliminating $21.4 billion of net debt by the end of the year.
Reliance’s Sales Dipping
Vista, which has more than $57 billion in capital commitments and invested in companies across sectors including media and entertainment, healthcare, and real estate, has made the recent investment to Reliance as the latter company showed plans for its new business operations including retail venture. Following the news, shares in Reliance rose 2.3% in a broader Mumbai market which was trading 1.2% higher at 0442 GMT in early Friday.
With the introduction of Jio in 2019, Ambani, unlike other Indian mobile carriers which depend on voice services to make money, has brought transformation by offering cheap mobile data plans that helped hundreds of millions of Indians to use the Internet in a massive scale. Moreover, Ambani has set to roll out a new retail venture under Jio, which includes sectors for combined interests in education, music, and films, in an attempt to stage a challenge to established e-commerce firms such as Amazon and Walmart’s Flipkart.
However, analysts expected Reliance would delay the launch of new ventures since its core business of energy sector had been hit sharply due to the coronavirus pandemic that hampered the growth of the global economy. Last month, Reliance reported a 39% decline in March quarter profit, hit by a sharp fall in oil prices and lower fuel demand prompted by the virus imposed travel restrictions.
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