Brookfield to infuse Rs 25,000 crore into RIL's telecom tower arm

Reliance Industries (RIL) on Friday said that Reliance Industrial Investments and Holdings had signed an agreement with BIF IV Jarvis India Pte, a unit of Brookfield Asset Management, for an investment by Brookfield (along with co-investors) for Rs 25,215 crore in units issued by the Tower Infrastructure Trust.

Brookfield will buy 100 per cent units issued by the Trust, which, in turn, owns 100 per cent equity of Reliance Jio Infratel (RJIPL), the operating company for Jio’s tower assets. 

RIL Chief Financial Officer V Srikanth said, “Brookfield is bringing in Rs 25,215 crore and will own 100 per cent of the tower company.” Proceeds from the investment will be used to repay existing financial liabilities of the tower business. The rest will be used to acquire RIL’s 49 per cent stake in RJIPL.  

“All the dues RIL has to tower companies will be repaid through the Brookfield investment. We have a tower use agreement between Jio and the tower company as per market prices. We’ll make payments to RJIPL like we would to any other tower firm. The Rs 25,000 crore of equity will come in and more debt will be raised and capital structure of the special purpose vehicle or SPV (RJIPL) will be redone. It will payback the Rs 12,000 crore existing liability to RIL,” said Anshuman Thakur, chief strategy officer of Jio. 

Meanwhile, Jio posted a 45.6 per cent rise in net profit at Rs 891 crore in the first quarter of FY20, beating Street estimates as its revenue from operations clocked a growth of 44 per cent. 

On a sequential basis, the net profit grew by 6.1 per cent while the revenue was up 5.2 per cent. With a subscriber base of 331.3 million as of June 2019 (and lowest churn in the industry of 0.97 per cent per month), Jio added 24.5 million net subscribers during the quarter (33.8 million gross subscribers). The earnings before interest, tax, depreciation and amortisation (Ebitda) was at Rs 4,686 crore, up 48.9 per cent, while the Ebitda margin stood at 40.1 per cent, up 130 bps year-on-year (YoY). 

The debt component of Reliance Jio now stands at Rs 75,000 crore, and the capex for Q1 stood at Rs 8,500 crore. At the end of the March quarter, Jio’s net debt stood at Rs 67,000 crore, down from Rs 91,000 crore in the previous quarter after it hived off its tower and fibre assets to infrastructure investment funds (InvITs). 

Thakur said, “From April 1, we have adopted the AS 116 accounting standards where our long-term leases have been capitalised and those are now shown below Ebitda and they have now moved to interest and amortisation.” This has resulted in a positive impact of Rs 370 crore to Jio’s Ebitda, the company said. 

On the ARPU front, Jio said it came down because subscribers have been moving to long-term plans from the 28 day- Rs 149 plan to the 84 day-Rs 399 plan.