ADIA, PIF $1 billion investment for Jio’s fibre assets likely today


MUMBAI: Ending almost a year of negotiations, Reliance Industries is likely to announce the $1 billion investment from Abu Dhabi Investment Authority and Saudi Arabia’s Public Investment Fund (PIF) in Jio’s fibre network, said people aware of the development.

The announcement is slated to be part of Friday’s quarterly results announcement.

The two sovereign wealth funds from the Gulf will be investing around $512 million each to acquire a total 51% in the infrastructure investment trust (InvIT) — Digital Fibre Infrastructure Trust (DFIT) — formed by Reliance Industries Ltd. The remaining 49% will be held by various Reliance entities that are also investing around a $1 billion. Of which, Reliance Industrial Investments and Holdings Ltd. (RIIHL) is investing $400 million as the sponsor of the trust. Another $600 million will be deployed by various entities of Reliance and Ambani family offices.

Jio Digital Fibre owns and operates a pan-India operational optic fibre cable network of approximately 17.37 million fibre pairs per kilometre (FPKM) as of March 31, 2020. By the end of the fiscal year it is slated to be at 21 million FPKM.

Just like its other Jio tower trust, this too will be a a 30-year sale and buyback agreement with Reliance and the investors. The investors are expected to get a minimum or floor of 12% internal rates of return on the equity invested with an upside from accrued from non-captive sales, added the people mentioned above. While around 58% of the fibre capacity is expected to be used by Jio alone for its own subscribers, the rest will be for third-party users, as per the terms of agreement.

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As per the documents filed with the Securities and Exchange Board of India (Sebi). DFIT plans to raise Rs 14,700 crore by issuing 1.47 billion units, priced at Rs 100 apiece to investors via a private placement. In all, RIL is looking to raise Rs 39,700 crore by monetising its fibre optic network assets housed in Jio Digital Fibre Private Ltd.

ET in its August 21st edition was the first to report that PIF had joined the negotiations after ADIA re-engaged with Reliance after a hiatus. On October 3rd, ET also reported that the $1 billion investment decision was firmed up and that DFIT will also raise an additional 25,000 crore by way of loans from local banks, including State Bank of India, HDFC Bank, Union Bank of India and ICICI Bank, said people aware of the developments.

Mails to Reliance, ADIA, PIF did not generate a response immediately.

According to the same Sebi filing, DFIT will eventually lend the entire Rs 39,706 crore to Jio Digital Fibre, which will use it to repay debt, including suppliers’ credit. The fibre optic unit, earlier a part of RIL’s telecom arm, Reliance Jio Infcomm, has a debt of Rs 87,296.3 crore, including suppliers’ credit.

After almost a year’s Reliance got all the regulatory approvals for selling its Jio tower InvIT to Brookfield and other co-investors for Rs 25,215 crore (about $4 billion). These have been its efforts to unlock value in its fibre assets were part of a series of time-bound asset-monetisation initiatives to pare debt. RIL had transferred its tower and fibre assets to two special purpose vehicles (SPVs) owned by two Sebi-registered InvITs or infrastructure investment trusts.

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Both ADIA and PIF have already invested $2.2 billion in Jio Platforms as part of its mega fund raising plans. They also invested in Reliance Retail

subsequently. There was expectation that GIC of Singapore would join the consortium but that has not happened yet. Interestingly, PIF was to be a part of the investor consortium in the tower InvIT as well, along with Canadian pension fund BCIMC and Singapore’s GIC.

Even the fibre discussions were stalled late last year over differences in commercial and operating terms between RIL and an ADIA-led consortium of GIC of Singapore and I Squared Capital, an infrastructure-focused fund.

Fixed broadband penetration is less than 20% while that of wirelines is 7% in India. Jio has built up the largest fibre network in the country and aims to take advantage of a broadband market that’s expected to grow two-five times in terms of subscribers.





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