Billionaire Mukesh Ambani owned petrochemical to telecom giant Reliance Industries (RIL) has raised Rs 1,894.50 crore from L Catterton, by selling 0.39% equity stake of digital platform Jio on a fully diluted basis.
With approximately $20 billion of equity capital across seven fund strategies in 17 offices globally, L Catterton is the largest consumer-focused private equity firm in the world.
The investments will translate into a 0.93% stake for TPG and a 0.39% stake for L Catterton in Jio Platforms.
Including this investment, Jio Platforms has raised over 1 lakh crore or nearly 10% of RIL’s market capitalization this year from top global investors since April 22, 2020.
Of this, deals worth at least Rs 60,753.36 crore are private equity investments from eight marquee global investors. This is by far the largest known PE investment in a single company in India.
Starting with Facebook’s Rs 43,574 crore investment in April, Jio Platforms has sold stakes to private equity firms KKR & Co., Silver Lake, Vista Equity Partners, General Atlantic, Mubadala, ADIA, TPG and L Catterton.
The deals signify the rapid digitisation opportunity in India, especially after covid-19. The markets have applauded this fund-raising exercise and RIL’s stock is now trading at all-time highs.
On April 22, 2020, Reliance announced the first investor to get on-board. Since April 21, 2020, the stock is up 28.53% as against the broader market index Nifty 50 which is up 11.03 per cent.
A noteworthy point is that Reliance has the highest weight in Nifty 50; thereby, a part of Nifty returns can be attributed to Reliance.
Jio Platforms has more than 388 million subscribers. As per the presentation made by the company, India has the world’s second-largest internet user base and is fast-growing, which has led to many foreign investors showing interest in the company.
Reliance Industries, which predominantly was into energy, textiles, petrochemicals, and natural resources, has diversified and introduced new revenue streams such as retail and telecommunication over the past couple of years.
Thus, the consumer segment (retail and digital) is contributing about 35 per cent to the company EBITDA in FY20, compared to a mere 2 per cent in FY15.
The flurry of deals by Jio Platforms are primarily aimed at taking RIL closer to its ambition to become free of its net debt of Rs 1.53 trillion (as in December 2019) by March 2021.
The Asia’s richest man has seen its flagship RIL’s debt surging in the past few years, especially due to the aggressive expansion of Reliance Jio Infocomm.
Net net we expect that the markets are clearly positively elated following the massive cash raising exercise seen in the last 6 to 7 weeks which is likely to see significant reduction in interest costs for Reliance wherein earnings growth is espected to remain strong ahead.
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