News Analysis

Stake sale in Jio Platforms to GA: Reliance may sell even more after Deal Number 4

Anand Kalyanaraman BL Research Bureau | Updated on May 18, 2020

RIL has been able to get top-dollar for its stake sales in Jio Platforms.   -  REUTERS

In its fourth major stake sale announcement in less than a month, Reliance Industries (RIL) has sold 1.34 per cent in Jio Platforms for ₹6,598 crore to General Atlantic (GA), a global growth equity firm. The deal pegs Jio Platforms’ equity value at ₹4.91 lakh crore and its enterprise value at ₹5.16 lakh crore – nearly the same as implied by the previous stake sale deals to Vista Equity Partners and Silver Lake, and a premium of about 12.5 per cent equity value as implied by the Facebook deal.

RIL had sold 9.99 per cent stake in Jio Platforms to Facebook, 2.32 per cent to Vista Equity Partners and 1.15 per cent to Silver Lake over the past few weeks. With the GA deal, RIL has now sold about 14.8 per cent in Jio Platforms for about ₹67,195 crore. There could be more deals on the cards. RIL may look to sell another 5.2 per cent in Jio Platforms to bring down its stake in the company to about 80 per cent.

This is going by the company’s statement along with its March quarter results that it had ‘received interest received for similar sized additional stake’ (as the Facebook deal)’.

RIL has been able to get top-dollar for its stake sales in Jio Platforms. The Facebook deal valuation was 10-15 per cent higher than what many analysts were earlier estimating, and the subsequent deals are at about 12.5 per cent higher equity valuation compared with the Facebook deal. RIL may also eventually pare its stake in Jio Platforms further through an IPO.

The deals over the past month or so have been a key factor in the RIL stock rallying sharply from its March-end low of ₹884, despite a rather weak show in the March 2020 quarter. The market seems pleased with the rapid big-ticket deals which should help RIL in its plans to deleverage its balance-sheet and become net debt-free by March 2021. The company’s net debt (debt less cash) as on March 2020 was about ₹1.6 lakh crore. The company’s debt-to-equity ratio as of March 2020 was 0.74 times.

The strong stock rally over the past couple of months has helped RIL price its forthcoming rights issue (opening on May 20 and closing on June 3) at a tidy price of ₹1,257.

The latest GA–Jio Platforms deal seems to have helped the RIL stock lose less in Monday’s trade (down 1.25 per cent) compared with the 3.44 per cent fall in the BSE Sensex. The stock closed at ₹1,441 in Monday’s trade.

Published on May 18, 2020

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