- private equity firm Silver Lake will invest Rs 5,656 crore ($746.74 million) in its digital arm, giving it a valuation of Rs 4.90 lakh crore.
- The deal comes days after Facebook said it would spend $5.7 billion to buy a 9.99 per cent stake in Jio Platforms
Technology: After a huge business deal with Facebook last month, Reliance Industries is set to further reduce its debt with a substantial investment of Rs 5,655.75 crore into Jio Platforms from the US private equity firm Silver Lake for 1.15% stake. This investment values Jio Platforms at an equity value of ₹ 4.90 lakh crore and an enterprise value of ₹ 5.15 lakh crore.
The Silver Lake deal represents a 12.5% premium to the equity valuation of the Facebook investment into Jio Platforms, a wholly-owned subsidiary of Reliance Industries Ltd (RIL).
After selling around 10% stake to Facebook, Reliance stated last week that it was in talks with other strategic and financial investors for a similar-sized deal to cut down debt.
Mukesh Ambani, the Chairman and Managing Director of RIL said that Silver Lake has an outstanding record of being a valuable partner for leading technology companies worldwide. He further added that this partnership has special significance for revitalization of Indian economy amid the severe disruptions caused by the COVID-19 pandemic.
“Silver Lake is one of the most respected voices in technology and finance. We are excited to leverage insights from their global technology relationships for the Indian Digital Society’s transformation,” he said.
Egon Durban, the co-CEO and managing partner of Silver Lake defining Jio Platforms said that it is one of the world’s most remarkable companies, led by an incredibly strong and entrepreneurial management team who are driving and actualizing a courageous vision.
“They have brought extraordinary engineering capabilities to bear on bringing the power of low-cost digital services to a mass consumer and small businesses population. The market potential they are addressing is enormous,” he said.
The deal is subject to regulatory and other customary approvals. Morgan Stanley acted as financial advisor to Reliance Industries and AZB & Partners and Davis Polk & Wardwell acted as legal counsels
Moody’s Investors Service said that the investment further shows RIL’s ability and willingness to monetize its digital services business and reinforces the company’s commitment to achieve a zero-net debt position by March 31, 2021.
“This (Jio-Silver Lake deal) is credit positive as it enhances RIL’s already strong financial flexibility, including the recently announced rights issue ($7 billion) and investments by Facebook Inc,” Vikas Halan, Senior Vice President (Corporate Finance) at Moody’s said in a statement.
He said that the initiatives that could reduce net debt by about $13.6 billion from the reported net debt of $21.4 billion as on March 31, 2020. The valuation also establishes another pricing benchmark for Jio Platforms.
“The investment by Silver Lake underlines further testament to the world-class digital platform that Jio has built, powered by leading technologies, such as Broadband connectivity, Smart Devices, Cloud and Edge Computing, Big Data Analytics, Artificial Intelligence, Internet of Things, Augmented and Mixed Reality and Blockchain,” it added.
Silver Lake has its investments in Airbnb, Alibaba, Ant Financial, Alphabet’s Verily and Waymo units, Dell Technologies, Twitter and numerous other global technology leaders.