RIL reorganizes telecom business prior to strategic monetization

Highlights of the restructuring

Reliance Industries, India’s most valuable company by shareholding, has restructured its telecom investments and holdings to facilitate its “early monetization”.

The oil-to-retail giant said it has decided to set up a new company exclusively for holding the digital business of RJIL — devoid of towers and fiber — and plans to sell stakes in this new company to ‘strategic partners’.

The new company will be positioned as a ‘high tech’ venture, and will be devoid of the more low-tech and commoditized aspects of the telecom venture — the towers and other passive infrastructure, including fiber optic cables.

These passive assets, valued at Rs 1.25 lakh cr by Reliance Industries, have been moved to Infrastructure Investment Trusts, RIL said.

What is left in RJIL, it said, is the connectivity business — minus the fiber and towers — as well as a range of apps and services built on top of the connectivity platform.

While the passive infrastructure — towers and fiber — was valued at Rs 1.25 lakh cr, Jio has valued the remaining business at Rs 2.37 lakh cr on its books (balance sheet).

The new company will be positioned as a “Digital Connectivity Platform” and will get most of its current valuation from its ownership of Jio’s remaining business.

RIL, in parallel, also moved to make this new company debt free.

Even after the demerger of the towers and fiber to separate investment trusts, RJIL continues to have net debt in excess of Rs 1 lakh cr.

This debt — of Rs 1.08 lakh cr — will be shifted to the balance sheet of the mother company, Reliance Industries.

In return, equity-debt instruments worth the above amount (Rs 1.08 lakh cr) will be issued to the new Digital Platform Company, wholly owned by RIL.

RIL will also transfer its existing equity ownership in RJIL, worth Rs 65,000, to this new Platform Company.

In other words, RIL’s entire equity holding in Jio will be held via this new subsidiary.

In addition to Jio (RJIL), this new Digital Platform Company will be home to a lot of non-Jio digital ventures, especially those planned for the future.

These include “further development initiatives of cutting-edge technologies” and “collaborations & partnerships”. These technologies include blockchain, AI and machine learning ventures, computing platforms and so on.

Once restructured like this, the Digital Platform Company, will be debt-free on a net level, except for spectrum obligations, RIL said.


The primary idea behind the reorganization seems to be to hasten the monetization of Reliance Jio.

If RIL had tried to monetize Jio directly — as a telecom operator — it would need to wait for at least 2-3 more years to achieve maturity.

Moreover, given the negative sentiment in the market towards telecom operators, valuations too may not have been as attractive.

Hence, the company seems to be taking out much of the ‘less attractive’ or ‘commoditized’ bits of Jio from this new vehicle, while adding more and more of the sexy, IT-related businesses in an effort to make it more attractive to investors and position it as a tech company and command higher valuations.

“Like global technology peers, the Digital Platform Company with negligible leverage makes a compelling investment proposition for both strategic and financial investors, many of whom have evinced strong interest in partnering with us. It will have significant financial strength to address the Digital Services opportunity in India,” the company said.

“This new Company will be a truly transformational and disruptive digital services platform,” said RIL Chairman Mukesh Ambani.

“It will bring together India’s No.1 connectivity platform, leading digital app ecosystem and world’s best tech capabilities globally, to create a truly Digital Society for each Indian. Jio has been heralding the digital services revolution in India and will continue to do so in the years to come.

“Given the reach and scale of our digital ecosystem, we have received strong interest from potential strategic partners. We will induct the right partners in our Platform Company, creating and unlocking meaningful value for RIL shareholders,” he added.

Overall, it said, the new structure will lead to “streamlined, optical capital structure to facilitate early monetization”.