Reliance Industries Ltd's move to put all its digital initiatives under a new wholly-owned subsidiary is aimed at monetising Reliance Jio through an initial open offer. The telecom business needs further capital as the ecosystem moves to 5G and RIL is ensuring that it has enough power to raise funds whenever required.

RIL has already demerged the telecom infrastructure including tower and fibre into a separate company, which has been monetised through a deal with private equity firm Brookfield. Post this demerger, RJIL has become asset light having a balance sheet size of Rs.2,37,000 crore. Now, by putting all the digital entities under a new company, RIL is readying the services arm for a possible monetisation .

RIL has already made it clear that it will list Jio's shares on the bourses. The new arrangement makes Jio, almost debt-free, thus improving its valuation.

The new digital company will also house future initiatives in the areas of healthcare, education, agriculture, commerce, government-to-citizen services, gaming, manufacturing and many others.

 Through a scheme of arrangement between RJIL and certain classes of its creditors including debenture holders for transfer of identified liabilities of up to Rs.1,08,000 crore to RIL. Post this Jio will become virtually net debt free company by March 31, 2020, with exception of spectrum related liabilities.

This is more bad news for incumbent players Airtel and Vodafone Idea who are struggling under a massive debt. The entire debt of telecom industry is around Rs.4 lakh crore. In addition, the latest ruling by Supreme Court puts an additional burden of Rs.1.3 lakh crore on the incumbent operators.

Jio on the other hand, with a debt-free balance sheet, looks to have the upper hand for now.

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