Net Debt Free Strategy
In the backdrop of the announcement at AGM held on August 12, 2019 that RIL had a clear road map to become a zero net debt company by March 2021, it started working on well thought out strategy since then. On AGM day, RIL made a spate of announcements including, launch of Jio Fibres, partnership with Microsoft, IoT, Home broadband, Enterprise broadband, Broadband for SME, block-chain network and partnership with Saudi Aramco. The net-debt of the company was Rs 161,035 crore as on March 31, 2020, and with the spate of investments in Jio Platforms amounting to Rs 115,693.95 crore from leading global investors besides rights issue capital raising of Rs 53,125 crore by June 20, 2020, the RIL became net debt-free company, well ahead of its target of March 2021. This year on 2nd July 2020, Jio Meet was launched, allowing free video conferencing across India.
Stake Acquisition in Jio Platforms
Jio Platforms has raised US$ 20.2 billion (equivalent to Rs 152,056 crore) overall from 12 marquee tech investors across the world, who have acquired 32.94% stake in Jio Platforms. The first investment took place on 22nd April and 12th one on 15th July i.e. within 12 weeks these deal announcements were concluded. The particulars of investment are date-wise listed in the attached table.
Market Capitalization
Additionally, RIL successfully raised Rs 53,125 crore by way of non-finance company's largest rights issue where 25% of the amount was collected upfront in June 2020 and rest will be on call in two tranches of 25% and 50% in May 2021 and November 2021 respectively. The rights issue offer was made at Rs 1,257/- a share in the 1:15 ratio, out of which 25% i.e. Rs 314.25 was collected upfront. The RIL PP partly paid share closed at Rs 1,420.55 on Friday, thereby netting a whopping gain of Rs 1,106.30 per share for investors, in less than 100 days of listing. RIL had become first Indian company to cross USD 100 billion mark way back in October 2007 when USD-INR exchange rate was Rs 39.50. Subsequently, market cap had fallen taking almost 11 years to recoup USD 100 billion dollar level on July 13, 2018 when exchange rate moved to Rs 68.60. It took exactly 26 months for RIL to double the market cap to USD 200 billion on 11th September 2020.
During pandemic period when other companies were struggling to retain market cap at pre-covid level, RIL market cap went up to Rs 14.95 lakh crore from a low of Rs 5.60 lakh crore attained on 23rd March 2020 i.e. a gain of 167% in less than 6 months excluding rights issue gains. Friday closing share price of Rs 2,318.85 puts RIL valuation at approx. USD 205 billion, with 40th most valuable firm tag in the world. The top 5 companies in India in terms of market capitalization are Reliance, TCS, HDFC Bank, HUL and Infosys with valuation of Rs 14.95 lakh crore, Rs 8.91 lakh crore, Rs 5.94 lakh crore, Rs 5.07 lakh crore, and Rs 4.03 lakh crore respectively.
Future Outlook
Reliance Retail has recently announced acquisition of retail business of Future group at a consideration of Rs 27,513 crore. Jio Platforms, a technological subsidiary, is ikely to grow at CAGR of 30% over next 10 years. Jio Platforms is likely to roll out 5G services in India as soon as spectrum allocation is done. Jio Platforms could be Rs 10 lakh crore contributor to market cap in next 24 months. Now the company would announce investments in Reliance Retail in coming quarters, which will make it one of the largest Retailers in India. Last week, Silver Lake has announced Rs 7,500 crore (1.75% stake) investment in Reliance Retail that sets the ball rolling for further investments. In addition to grocery, RIL is planning to expand JioMart to cover Electronics, fashion, pharmaceutical and healthcare in the coming days. Reliance Retail is getting transformed into an O2O business model - offline to online - company. Reliance Retail could be commanding a market cap of Rs 5 lakh crore or more in next 24 months.
Further, Oil-to-Chemicals (O2C) will no longer remain as commodity business. Saudi Aramco deal seems to be uncertain, however other strategic and financial investors are not ruled out in this line of business. O2C could become Rs 7.5 lakh crore market cap contributor in next 24 months. RIL is likely to reach a market cap in the range of Rs 22-24 lakh crore in the coming 24 months. Demerger of these businesses from the parent company would create further value for the shareholders.
Please keep watching this space for more updates on Stock Markets!
List of Marquee Investors in Jio Platforms
Comments