Jio Approaches Global Investors For Monetizing Its Tower And Fiber Assets

Reliance Industries Ltd. plans to monetise its tower and fibre assets to reduce a debt of more than Rs 1.7 lakh crore.

The oil-to-telecom conglomerate, in an analyst meet after announcing December-quarter results, said its telecom arm will look to monetise the assets through a special purpose vehicle where cash flows are predictable. Also, Reliance Jio Infocomm Ltd. is open to sharing towers and fibre assets with other telecom operators, it said.

Reliance Jio has 2.20 lakh towers and nearly 3 lakh kilometres of optical fibre assets. The company’s decision to sell its non-core telecom assets is a “game changer”, according to Edelweiss Securities. “It is likely that Reliance Industries has lined up strategic buyers for monetisation,” it said. “A sale would lead to a 33 percent dip in debt.”

CLSA expects the monetisation to be completed in the first half of 2019. It will deleverage a large portion of the company’s debt and allay a key concern, the research firm said.

Rising debt has been an overhang for the company led by India’s richest man. Since the launch of Reliance Jio, the parent’s consolidated debt has been rising due to higher capital expenditure. The Mukesh Ambani-led company, however, was able to maintain its leverage ratio due to higher contribution from consumer and petrochemicals businesses.

Moody’s Investor Service and Fitch Ratings Inc. have kept their long-term ratings on Reliance Industries same as that of India at BAA2 and BBB respectively.

Reliance Jio earlier this month said it had filed a scheme of arrangement with the National Company Law Tribunal to demerge its tower and fiber assets into separate entities. The move is subject to regulatory approvals.

Brokerages remain upbeat on Reliance Industries as it managed to beat estimates in a seasonally weak quarter. The company’s gross refining margin fell to $8.8 a barrel due to global weakness but was higher than the $8.3-per-barrel estimate. Its consolidated net profit was aided by a strong performance of the retail and telecom segments.

Shares of Reliance Industries jumped as much as 2 percent the highest in over a month after the company’s third-quarter earnings beat estimates.―Based on news from Bloomberg Quint