Jio may take INVIT route to monetize fibre, tower units
MUMBAI : Reliance Jio Infocomm Ltd may pare debt by monetizing its fibre and tower assets through the infrastructure investment trust (INVIT) route, analysts said after a meeting with top executives of parent Reliance Industries Ltd.
Reliance Jio, which decided to separate the telco’s tower and fibre assets last month, said this will help Jio become an assetlight digital services company. Jio is spinning off its fibre and tower businesses into Jio Digital Fibre Pvt. Ltd and Reliance Jio Infratel Pvt. Ltd, respectively.
“The end objective will be to have different set of investors who would want to run these companies. This means that these assets go off our balance sheets, so the liabilities also go down,” RIL’S joint chief financial officer Srikanth Venkatachari told reporters on Thursday.
Jio’s profit rose to ₹831 crore in the December quarter from ₹681 crore in the preceding threemonth period.
“The planned monetisation of fibre and tower assets through a transfer to two separate entities, in three to six months, which is likely to follow an INVIT structure, will help reduce Jio’s debt, make it asset-light, and transfer future capex to the new entities,” wrote Citi Research in its report dated January 18.
INVIT is a mechanism that enables developers of infrastructure assets to monetise them by pooling multiple projects under a single entity or a trust structure. Invits are long-term instruments structured as funds with a very long tenure or open end structure. Invits pool small sums of money from multiple investors for investing in assets that ensure cash flow over a period of time.
Investors receive part of the cash flow back, in the form of dividend. Jio will be open to sharing the infrastructure with other telecom operators on market-based pricing and it does not view the sharing of the assets as a loss of competitive advantage. Analysts, however, say that Jio’s intent to monetize its own fiber assets could create more competition in the fiber sharing business.
Having two separate undertakings will not only transfer associated debt from Jio’s books to these entities but attract a new pool of capital into these assets. According to Citi Research, some investors have already evinced interest in Jio’s plan. Jio will be the anchor customer for both tower and fibre assets (on a leasing model), with all future related capex to be borne by these entities. “It’s likely that RIL has lined up strategic buyers for eventual monetisation. A sale of these assets would lead to a 33% dip in debt with over ₹1 trillion debt locked up in these assets,” said Edelweiss Securities Ltd in its report dated January 17.
RIL has spent ₹3 trillion on Jio. The company would roll out its home broadband and enterprise service—jio Giga Fiber—this year. It has already seen strong customer interest across 1,400 cities, and is currently connecting homes based on requests received.