Reliance Jio transfers fibre and tower infrastructure to InvITs

To deleverage its balance sheet, Reliance Jio Infocomm (RJio) has completed the transfer of its optic fibre cable and tower infrastructure to two infrastructure investment trusts (InvITs). The two entities — Digital Fibre Infrastructure Trust and Tower Infrastructure Trust — had been set up by a wholly-owned subsidiary of Reliance Industries (RIL), the company told the stock exchanges  on Monday night. RIL had indicated the plan in January, for asset monetisation, higher earnings and lower capital expenditure. 

RIL shares closed on Tuesday at Rs 1,388.45 on the BSE, down 0.2 per cent from Monday. Jio has around 220,000 towers and 300,000 km of fibre. The optic fibre cable infra was with Jio Digital Fibre (JDFPL) and the tower infra with Reliance Jio Infratel (RJIPL). JDFPL has allotted Rs 500 crore of equity to the shareholders of RJio; RJIPL has done so for Rs 200 crore of equity shares.

The company notified the exchanges that the Securities and Exchange Board of India had registered the two InvITs — Digital Fibre Infrastructure Trust (DFIT) and Tower Infrastructure Trust (TIT). Both were set up by Reliance Industrial Investments and Holdings (RIIHL), a wholly-owned subsidiary of RIL.

DFIT has acquired control of JDFPL by purchasing 51 per cent of the latter’s equity share capital for Rs 262.6 crore. TIT acquired control of RJIPL by purchasing 51 per cent of the equity for Rs 109.6 crore. 

Company officials had said during the announcement of the December quarter results that RIL had invested about Rs 1.4 trillion in its refining and petrochemicals business, another Rs 3 trillion in telecom and Rs 14,000 crore in the retail business. These businesses had expanded aggressively for seven years. 

In a report last month, SBI CAP’s research co-head, Rajiv Sharma, said after the deleveraging of assets, RJio’s wireless business would have to pay for using use tower and fibre assets. “No doubt with this move Jio will see savings in depreciation and interest costs but some impact on Ebitda (operating earnings) cannot be ruled out,” he wrote.

There is also a possibility, wrote SBI CAP, of Jio raising its rates by 4-6 per cent. 

Last month RIL announced its east-west gas pipeline (used by it for transporting gas) was being sold to an infrastructure fund sponsored by Brookfield for Rs 130 billion ($1.9 billion) under an InvIT structure. 

Rating agency ICRA had reported that telecom companies were divesting tower assets, with the latter likely to emerge as an independent business; hence, fibre assets were also being hived off to separate entities. It estimated the market value of fibre assets owned by the major private companies at Rs 1.2 trillion. So, even some stake sale could generate enough to improve their liquidity.

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