Investments In RIL-Jio During Lockdown

RIL Chairman Mukesh Ambani

When companies across the world are battling the Covid-19 headwinds, one of India’s largest conglomerate Reliance Industries Limited (RIL) has raised over ₹1 lakh crore via selling stake to several multinational giants and Rights Issue.

Crux of the Matter

Seven Strikes

  • 22 April – Facebook invested ₹43,574 crores in Jio, acquiring a 9.99% stake.
  • 03 May – Private equity firm Silver Lake announced that it will invest ₹5,655.75 crores into Jio Platforms for a 1.15% stake.
  • 08 May – Vista Equity Partners announced an investment of ₹11,367 crores in Jio Platforms for a 2.32% stake.
  • 17 May – General Atlantic, a US investment firm, bought a 1.34% stake by investing ₹6,600 crores in Jio Platforms.
  • 22 May – RIL announced KKR will invest ₹11,367 crores into Jio Platforms for a 2.32% equity stake.
  • 05 June – Abu Dhabi sovereign fund Mubadala Investment Company announced infusion of ₹9,093.6 crores in Jio Platforms in exchange for 1.85%. Silver Lake announced an additional investment of ₹4,547 crores for a 0.93% stake.
  • 07 June – Abu Dhabi Investment Authority bought a 1.16% stake in RIL for ₹5863.50 crores.


Response To Rights Issue
Reliance Industries Limited came up with a Right Issue, which was oversubscribed 1.59 times. The issue would raise 25% of the total corpus now and the other 75% later in 2021. RIL would receive ₹13,280. A rights issue is a way by which a listed company can raise additional capital by only giving its existing shareholders the right to subscribe to newly issued shares in proportion to their existing holdings. The amount of investment is expected to act as a catalyst to Mukesh Ambani’s plan of making Reliance a debt-free company. The company’s debt as on 31st March 2020 stood at ₹1,61,035 crores.

Reliance is likely to be debt-free three months before its scheduled date, i.e by December 2020 than March 2021.

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  • On March 23, 2018, Reliance Industries Ltd acquired a majority stake in Saavn, Indian online music streaming service, and combined Saavn with its own digital music service, JioMusic. The combined entity is valued at over $1 billion and rebranded as JioSaavn.
  • Guru is a 2007 Indian drama film starring Abhishek Bachchan, Aishwarya Rai, Madhavan, Vidya Balan, Arya Babbar, and Mithun Chakraborty in the leading roles. The film is loosely based on the life of one of India’s biggest industrial tycoons, Dhirubhai Ambani.
  • KKR & Co. Inc. is an American global investment firm that manages multiple alternative asset classes. The firm has completed more than 280 private equity investments in portfolio companies with approximately $545 billion of total enterprise value. The firm was founded in 1976 by Jerome Kohlberg, Jr., and cousins Henry Kravis and George R. Roberts, all of whom had previously worked together at Bear Stearns.

As Jio Keeps Growing, Reliance Plans to Raise More Funds

Reliance Industries owned Jio Infocomm reported a jump of 177% in its profit in Jan-March 2020 quarter as compared to the last year same period. However, Reliance Industries on the whole witnessed a 37% dip in profit – highest ever. RIL has been in the lime light with some blockbuster deals in recent, and it seems many are yet to come. Is the ‘Zero Debt’ finish line ahead of the timeline?

Crux of the Matter

Rely on Reliance?
Mukesh Ambani’s Reliance Jio Infocomm announced a profit of ₹2,331 crores for the Jan-March 2020 quarter. There is a year on year increase of 177% in the profit of Jio. However, Reliance Industries’ overall net profit in Jan-Mar 2020 quarter stood at ₹6,546. This is a 37% (y-o-y) fall in profit – highest ever fall in profits witnessed by RIL.

Reliance also announced a Rights Issue. Rights Issue share ratio is 1:15, meaning you can buy 1 share for 15 shares of RIL you hold. Each share in the issue is priced at ₹1,257. With the Rights Issue, RIL will raise ₹53,125 crores. This is the first time in 30 years RIL is raising funds from the public.

In Other Things…
While the Coronavirus pandemic has hit the world very hard, Reliance Chairman Mukesh Ambani has decided to take a 100% salary cut. Top executives of RIL will take a 30-50% salary cut. Whereas, RIL employees with a salary of more than ₹15 lakhs will take a 10% salary cut. Annual cash bonuses and performance-linked incentives have also been deferred.

Will the ‘Zero Debt’ Plan Be Achieved Early?
Mukesh Ambani announced to make Reliance debt free in the last Annual General Meeting. At that time, RIL had ~ ₹1.5 lakh crores debt. Since then, RIL in 2019 partnered with Microsoft for its Jio employees. Recently, Facebook invested $5.7 bn in Jio. RIL is in talks with Saudi Aramco to sell around a 20% stake. Brookfield Asset Management is also likely to invest in RIL’s telecom towers.

With all these deals and many on their way, will RIL be debt-free before March 2021 as pledged by Mukesh Ambani?

Summachar Coverage: Microsoft-Reliance Amity: India A Hot Spot For Their Future Digital Ambitions

Summachar Coverage: FB Goes Big On Jio

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  • Reliance’s Petroleum Refinery at Jamnagar, Gujarat is the world’s largest. It has a capacity of refining 1.24 million barrels per day. It was established by Mukesh Ambani in 2000.
  • Mukesh Ambani is fond of cars. He has over 160 cars including Rolls Royce Phantom, Mercedes-Maybach Benz S660 Guard, Bentley Continental Flying Spur, Aston Martin Rapide, and the completely bulletproof BMW 760Li.
  • India is the second-largest oil refiner in Asia with a capacity of 249.45 million tonnes only behind China.

FB Goes Big on Jio

In the backdrop of markets and industries working on thin line due to Coronavirus lockdown, tech giant Facebook invested $5.7 billion in Mukesh Ambani’s telecom company Jio. This deal has the potential to make Jio a digital mammoth that caters to all the needs of its user through a single digital platform.
Complete Coverage: Coronavirus

Crux of the Matter

The Great Indian Deal
Facebook bought a 9.9% stake in Mukesh Ambani’s telecom company Reliance Jio. This investment of $5.7 billion (₹43,574 crores) values Jio at $65.95 billion (₹4.62 lakh crores). This places Jio amongst the top 5 listed companies in terms of market capitalization in only 3.5 years of commercial launch. This deal is also the largest investment by a tech company for buying a minority stake in another company. It is also the largest FDI in India’s tech sector.

What’s in for the consumer?
The deal turns Jio from a telecom company to a digital giant. A single digital platform that can do the following can come out of the joint effort of FB and JIO:
Calling, messaging
Ecommerce
Ticket bookings
Creating, editing videos
News
Loan applications
Filing tax returns
Money transfer and much more

One focus of our collaboration with Jio will be creating new ways for people and businesses to operate more effectively in the growing digital economy. For instance, by bringing together JioMart, Jio’s small business initiative, with the power of WhatsApp, we can enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience.

Facebook

What’s in it for Facebook?
Facebook has a huge market in India. It has:
a) Facebook users: 260 mn users – highest in the world
b) WhatsApp users: 400 mn users – highest in the world
c) Instagram users: 80 mn users – second highest in the world


Facebook is eyeing India’s huge market which is growing at a fast rate. It is looking to benefit from the 400 mn user base of Jio entrenched till the last Indian. In 2016, TRAI shut down Facebook’s Free Basics plan of providing internet. Facebook’s WhatsApp payment service will soon be launched in India and is expected to compete with Google Pay, PayTM, PhonePay, Amazon Pay, etc. The tech giant is likely to drive unprecedented growth through the Indian market.

Summachar Coverage: Microsoft-Reliance Amity: India A Hot Spot For Their Future Digital Ambitions

What’s in it for Jio?
Mukesh Ambani announced to make Reliance debt-free by March 2021 and this deal could help in deleveraging India’s one of the largest conglomerates Reliance Industries. It had ₹1.5 lakh crores of debt as on the financial year ending March 2019. RIL already in talks with Saudi Aramco to sell a 20% stake of the oil-to-chemical division of RIL. Ambani is also in talks with Canadian private equity firm Brookfield Asset Management for selling a stake of telecom towers. In 2019, Jio joined hands with Microsoft for the development of data centers in India with the help of the Azure cloud.

All of us at Reliance are humbled by the opportunity to welcome Facebook as our long-term partner in continuing to grow and transform the digital ecosystem of India for the benefit of all Indians.

Mukesh Ambani, Chairman, RIL
Curiopedia
  • Facebook bought Whatsapp in 2014 for a staggering $19.6 billion deal. This has been one of the biggest silicon valley deals ever. This acquisition was 10 times the acquisition of Instagram by Facebook.
  • The Facebook–Cambridge Analytica data scandal was a major scandal in early 2018 where Cambridge Analytica harvested the personal data of millions of people’s Facebook profiles without their consent and used it for political advertising. It has been described as a watershed moment in the public understanding of personal data and precipitated a 17% fall in Facebook’s share price.
  • Soon after the broadband wireless auction (BWA), in June 2010, RIL bought a 96% stake in Infotel Broadband – promoted by Anant Nahata – that had won 22 circles in the BWA. They started to work as a telecom subsidiary of Reliance, and later in January 2013, they were named Reliance Jio Infocomm Limited. Hence, initially, Jio was called IBSL (Infotel Broadband Services Limited).

Microsoft-Reliance Amity: India a Hot Spot For Their Future Digital Ambitions

Reliance Industries Chairman Mukesh Ambani and Microsoft CEO Satya Nadella engaged in an informal conversation on February 24 at the Future Decoded CEO Summit which was attended by more than 150 CEOs. They discussed the nuances of the expanding business landscape and the potential of India as a digital nation.

Crux of the Matter

Nadella’s High Hopes for India
At the Summit, Satya Nadella gave a solo presentation on India’s growing digital potential and appetite for technology, with its 560 million Internet users, 450 million mobile users, and the third-largest start-up ecosystem in the world. He indicated that the defining capability for companies would hinge on how they built their own technology as 72% of jobs for software engineers were outside the technology industry.

India’s Demographic Dividend had received notice in this year’s Budget. Satya Nadella also pointed out the 650 million population under the age of 25 as a great asset for the IT sector which is valued at $180 billion. He later joined Mukesh Ambani for a brief chat.

The Reliance Chairman highlighted the growth India registered in the past decades by saying, “when you were joining Microsoft in 1992 the economy in India was $300 billion and today it’s $3 trillion and fundamentally this whole progress in a certain way has happened on the back of technology,”

Strong Grassroots Turn into Sturdy Biz Ties
Jio and Microsoft have partnered under which Jio’s internal employees would be moved to Microsoft Office 365 and it would be shifting all of its existing software applications to Microsoft Azure Cloud.

I am very privileged that you have committed to India on a scale that I never anticipated that a multinational will and we’re very excited about our upcoming partnership. And I think, as we look at this decade, it will be a defining partnership.

– Mukesh Ambani on partnership with Microsoft

Ambani believes that India today when Trump is to visit India, is very different from what President Carter or President Clinton or even President Obama observed in their visits to India.

Microsoft has come up with programs like Microsoft for Startups, corporate venture fund M12, and ScaleUp program specially designed for Series A-C startups which are aimed to boost the start-up ecosystem in India. In June 2019 Microsoft has pledged to invest up to $10 million in Indian start-ups.

Nadella questioned Ambani on his future ambitions for SME businesses and how the landscape can be changed. To which Ambani shared the growth of Reliance over 5-decades from a start-up to a multi-national firm.

Every small business and entrepreneur in India has the potential to become a Dhirubhai Ambani or a Bill Gates and that’s what differentiates India from the rest of the world. The entrepreneurial power we have in our grassroots is enormous.

– Mukesh Ambani

Mukesh Ambani also made relevant comparisons between the time before and after the launch of Jio highlighting the impact and transformations it brought into the Indian telecom sector. He said, “India can become a premier digital society and what Jio has achieved in the last 3 years is 380 million customers who have migrated to 4G technology and where earlier broadband speed was 256 kbps and post-Jio now it is 21 Mbps across every single village in India.”

Mukesh Ambani also praised Nadella’s leadership style and his philosophy which he said is not just about product or profit but about people and their continuous reinvention of capability which was the strength of an organization.

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Internet User Penetration Research shows that at the end of July 2019, the number of mobile subscribers across India amounted to approximately 1.1 billion. This was an increase of nearly 13% as compared to the subscription numbers in June 2016. In 2018, 29% of the population accessed the internet from their mobile phone. This figure is expected to grow to 35% in 2023. The introduction of the government’s Digital India initiative hand in hand with the increasing internet penetration over the recent years, resulted in the country’s digital population amounting to approximately 560 million active users as of January 2019. The traffic in the world’s second-largest internet market at this stage was largely dominated by mobile internet users. More Info  

Satya Narayana Nadella is an Indian American business executive. He is the chief executive officer (CEO) of Microsoft, succeeding Steve Ballmer in 2014. Before becoming CEO, he was the executive vice president of Microsoft’s cloud and enterprise group, responsible for building and running the company’s computing platforms. Nadella worked at Sun Microsystems as a member of its technology staff prior to joining Microsoft in 1992. At Microsoft, Nadella has led major projects that included the company’s move to cloud computing and the development of one of the largest cloud infrastructures in the world. More Info

A'nil' Ambani pleads poverty, Claims net worth to be zero

Anil Ambani with Mukesh Ambani

Brother of billionaire Mukesh Ambani, Anil Ambani has dues amounting to $680 mn to three Chinese banks. Once with a net worth of $42 billion, Anil in a response to the London Court’s order declared his net worth zero.

Crux of the Matter

Three Chinese banks – Industrial & Commercial Bank of China Ltd. (ICBC), Export-Import Bank of China and the China Development Bank – have filed a lawsuit against Ambani for default on a loan amounting to $925 mn given to now-bankrupt Reliance Communication (RCom). Although RCom had paid a part of the loan, it defaulted early 2017. $680 million are still due.

The London Bank Judge, David Waksman asked Anil Ambani to deposit $100 million to the bank’s account within six weeks. Anil Ambani and his defense team lead, Harish Salve pleaded the court to not ask Mr. Ambani to cover the amount he cannot pay. His lawyer, Robert Howe said that the payment would be an obstacle to his efficiency of defending himself.

The current value of my shareholdings is down to approximately $82.4 million and my net worth is zero after taking into account my liabilities. In summary, I do not hold any meaningful assets which can be liquidated for the purposes of these proceedings.

– Anil Ambani

However, the Chinese Banks did not believe this. They contradicted the opposing lawyers’ arguments by pointing out Ambani’s sumptuous lifestyle and assets that he owns. Mr. Anil and his lawyers argued that the assets belonged to the company.

Chinese banks said that Ambani had given a ‘personal guarantee’ for the loan, while Ambani responded that he only offered a ‘personal comfort letter’ and not an ‘extraordinary potential personal liability’ that might have required Ambani to liquidate his personal assets to pay off the debt.

ICBC’s lawyer Bankim Thanki had commented that Ambani’s argument was an opportunistic one and that it was an ‘attempt to evade his financial obligations’. He also pointed out his luxurious fleet of cars and his $56 million luxurious yacht as a ‘dichotomy’ of his poverty plea. He also asked how was he able to afford such expensive legal care. Ambani and his lawyers are planning to appeal the court’s order.

Brother at Rescue
Anil Ambani is the brother of Asia’s richest man, Mukesh Ambani, whose net worth more than $50 bn. Anil Ambani was involved in another financial scuffle last year. Ericsson AB India demanded payment of INR 550 crores, due from the bankrupt RCom. RCom had filed for bankruptcy in 2019. Supreme Court had said Anil Ambani that if he failed to pay the dues he will be imprisoned. Brother Mukesh Ambani had stepped in at the eleventh hour and resolved the matter by paying off the debt.

However, in the plea against the London Court, Anil Ambani said that he would not be able to make arrangements from outside or from relatives, including his billionaire brother Mukesh Ambani.

From Riches to Rags
Anil Ambani, now caught up in a debt spiral, held $42 bn worth in 2008. The 2G Scandal of 2011 was the beginning of the end for Anil Ambani. After the scandal broke out, his net worth plunged to $8.8 bn.

Derailing Reliance Power affected Anil’s net worth in 2013 and it fell to $5.2 bn. With the telecom market gaining traction in 2016, Anil Ambani’s RCom was unable to match the strides. The hit halved Ambani’s worth to $2.5 bn. In 2019, RCom had filed for bankruptcy, dwindling further Anil’s net worth.

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