RIL looks to sell 30% Stake in Reliance Jio – Hopes to Build New Partnerships

Reliance Jio Infocomm Limited (RJIL) has been in the news for the past year or so. The company’s grand expansion plans coupled with the promise of cutting-edge fourth-generation services has garnered a lot of attention from both the general public and media outlets. Now, the Mukesh Ambani owned company is contemplating selling up to 30 percent stake of RJIL. This, analysts expect, could bring in immense capital into Reliance Industries Limited (RIL).
Reliance Jio has already seen investments of over Rupees 33,000 Crore from its parent company, RIL. The telecom venture is expected to be operation by early next year. Many analysts believe that selling a stake in the company could reduce the risk factor in RJIL. This could turn out to be critical as many investors are worried about the profitability of Reliance Jio as it faces stiff competition from existing players such as Vodafone, Bharti Airtel and others. Global Investment giant UBS valued Reliance Jio at Rupees 140 a share, a value that would be driven north in case of any external investment, not to mention the boost this would give RIL’s share which currently are priced around the Rupees 1,100 mark.
A source within the company on condition of anonymity told us, “As of now, stake sale might not fetch good valuation. But once the company is up and running and consumers get first-hand experience of world-class services, the valuations will get better.”
This is not the first time that RIL will be selling stake in a new venture. Earlier, it had sold a 30 per cent stake in 23 KG-D6 gas blocks to BP Plc in 2011 for $7.2 billion and another 10 per cent to Canada’s Niko Resources. It had also sold a five per cent stake to US oil major Chevron in 2006, when it set up its Jamnagar refinery. Chevron sold the stake back to RIL in 2009.
Another option open to Reliance is the prospect of taking over or acquiring another telecom company in India as a second-stage investment. At present, Tata Teleservices, Aircel and Videocon are looking for partners for their telecom ventures and Reliance could be a natural partner. Besides, South Africa-based MTN is an international player looking at an India entry. It is reported to be doing due diligence on a Mumbai company.
Only time will tell what the future hold for Mukesh Ambani’s Reliance Jio. For now though, the company is conducting extensive field trials for what will become India’s foray into a new age of mobile technology. With string backing from RIL, Reliance Jio could well be the game changer the public has lobbied for in this sector for years.
Summary:
Mukesh Ambani’s Reliance Jio Infocomm Limited is considering selling a small stake in the company in order to bring in outside investment and de-risk the entire company’s investments.