How soon can Jio Platforms help RIL become zero net-debt?

During the week, Reliance sold the fifth tranche stake in Jio Platforms to KKR for a consideration of Rs.11,367 crore. The 2.32% stake was sold at valuations similar to Silver Lakes. Where does that leave RIL in its zero debt plans?

Monetizing Jio Platforms

With the big digital shift, RIL managed to monetize its Jio Platforms property quite easily. After selling a 9.99% stake to Facebook, RIL followed it up with stake sale to Silver Lakes, Vista Equity, General Atlantic and KKR. Overall, RIL has managed to monetize 17.2% stake in Jio Platforms for Rs.78,500 crore which gives an overall valuation of $63 billion to Jio Platforms. That is proving to be the real value generator for RIL even as the core refining and petchem business has shown weakness.

Rights issue plans

Apart from the Rs.78,500 crore raised by monetizing Jio Platforms stake, a mega rights issue worth Rs.53,150 crore is also underway. While RIL proposes to use 75% of these proceeds for repaying debt, the catch is that the full amount will only be realized by Nov-21. That is well beyond RIL’s target date of Mar-21 to become zero net-debt. Just about 25% of the rights amount will be in the coffers of RIL by Mar-21. Hence RIL may have to look at other sources to actually achieve the zero net-debt target by the end of March 2021.

How else can RIL monetize?

With RIL having sold 17.2% stake in Jio Platforms already, further monetization beyond 20% looks unlikely at this point of time. Hence Jio monetization may not really go much beyond these levels. The other option of Saudi Aramco taking a stake in the refining and chemicals unit is huge but it is unlikely to happen as long as the oil price situation continues to languish at these levels. That means; without the Aramco stake sale, RIL would find it hard to meet the Mar-21 deadline of becoming zero net-debt. Since RIL would get around Rs.30,000 crore from tower sale and the oil retail JV with BP, it can become zero net-debt by extending its time limit to Nov-21. At this point, the Saudi Aramco deal may be extremely difficult to fructify.

An ace up their sleeve

It has often been seen that the Ambani family has an ace up its sleeve. The Jio Platforms monetization was one such ace they revealed in last 2 months. RIL has been consistent about its intent to become zero net-debt by March 2021 and it looks unlikely that they would be keen to postpone the said target date. Evidently, RIL will not want to monetize much more of Jio Platforms as they view data as the new oil; and rightly so. Whether RIL looks at a QIP placement or some other form of monetization remains to be seen. It will be all about that ace up their sleeve!