Intel Capital invests ~1,894 crore in Jio

Reliance Industries (RIL) on Friday announced a stake sale of 0.39 per cent in its digital services subsidiary, Jio Platforms, to Intel Capital for ~1,894.50 crore.

The latest fundraising comes two weeks after RIL announced that it had turned net debt-free well ahead of its deadline of March 2021. As of March 31, Reliance had a net debt of ~1.61 trillion.

Intel Capital is an arm of Intel, the world's largest semiconductor manufacturer. It joins 11 other investors, including sovereign funds and private equity firms, which now collectively own 25.09 per cent in Jio Platforms.

In the past two months, Jio has raised ~1.17 trillion through stake sales to ramp up its digital services business and expedite its debt reduction goals.

“Intel Capital has an outstanding record of being a valuable partner for leading technology companies globally. We are therefore excited to work together with Intel to advance India’s capabilities in cutting-edge technologies that will empower all sectors of our economy and improve the quality of life of 1.3 billion Indians,” RIL Chairman Mukesh Ambani said in a statement.

The investment led to a 1.53 per cent uptick in the RIL stock, which closed at ~1,787.5 on Friday. Digital services accounted for just 10 per cent of the company’s operating profit in FY18, and were the third-largest segment in FY20 after petrochemicals and refining. Wendell Brooks, Intel Capital president, said: “Jio’s focus on applying its engineering capabilities to bring low-cost digital services to India aligns with Intel’s purpose of delivering breakthrough tech that enriches lives.”

However, analysts at HSBC expected it to contribute 36 per cent of RIL’S consolidated operating profit for FY21, the highest across its segments. Both the digital and more importantly the retail business are expected to drive the next round of value unlocking in RIL. The two segments are expected to be listed over the next three to five years.

On the oil and gas business, Jyoti Roy, DVP, equity strategist at Angel Broking, believes that the segment will recover in the second half of the year. “Given no significant capex outlay in the near future, the hydrocarbon segment should generate free cash flows which can be used to fund expansion in other businesses."