USD 24 Billion Holding firm to invest in India's biggest e-Commerce platform
Jio to be debt free by March 2020
Reliance Industries to be debt free in 24 months
After Jio has created a much visible dent in the data service market in India, Billionaire Mukesh Ambani has moved another step closed to building an e-commerce mammoth for India, to take on the likes of Amazon and Walmart owned Flipkart.
Reliance Industries board approved a proposal to invest USD 15 Billion into a fully owned subsidiary which will further invest the amount in Reliance Jio Infocomm. Such capital transfers are expected to make Jio debt free by the end of this financial year, as per information from RIL.
As already evident over this half of the decade, Reliance foray into the data and digital services market to fuel future growth, the move to e-commerce is probably set to make a dent in another internet based segment - online shopping. The woes of the offline trader continues. This is more apparent when Mukesh Ambani told shareholders that the new digital businesses of RIL, including retail, are likely to contribute 50% of Reliance earnings in the next few years, as compared to 32% now.
Ambani has promised to ready the new holding firm for an initial public offering in five years from now. This seems plausible as the Jio network, after its launch just three years ago, has reached the zenith in India with more than 35 crore users.
RIL will invest the money in the holding company. Like Alibaba Group Holding Ltd and Alphabet Inc the money will be invested as optionally convertible preference shares. The unit will acquire the parent's equity investment of Rs 65,000 crore in Jio, as per source in RIL.
Subsequent to the infusion of equity, Reliance Jio will transfer liabilities worth Rs 1.08 Lakh crore to a subsidiary of the parent, turning Jio almost debt free, excluding airwave related liabilities.
So, while Jack Ma, the English teacher, started Alibaba from scratch, Reliance will use his mammoth empire to fuel e-commerce for India by connecting retailers and consumers. Ambani also is expected to tap infor mom-n-pop shops similar to Alibaba.
With proposed sell off of portions of Reliance Oil and Chemical business to Saudi Arabian Oil Company at an enterprise value of USD 75 Billion, the years of spending billions of dollars on new business, Mukesh Ambani is cleaning up his balance sheet to make it debt free in the next 24 months.