NEW DELHI - U.S.-based private equity firm Silver Lake will invest 56.56 billion rupees ($746.6 million) in Jio Platforms, the digital services arm of billionaire Mukesh Ambani's Reliance Industries, as the Indian oil-to-telecom conglomerate steps up efforts to reduce its substantial debt pile.
The investment, announced by Reliance in a stock exchange filing on Monday, comes less than two weeks after Facebook invested $5.7 billion to take a 9.99% stake in Jio Platforms. The deal was one of the largest investments by the U.S. social media giant and made it the largest minority shareholder in the telecom provider, which has over 388 million subscribers in India.
Monday's announcement of the Silver Lake investment also follows the approval by Reliance Industries on Friday of plans for India's biggest-ever rights issue. The 531 billion-rupee issue is aimed at cutting Reliance Industries' huge debt and comes as India's coronavirus-combatting measures have reduced demand for oil and petrochemical products, dealing a blow to the conglomerate's hydrocarbon business.
The latest Silver Lake investment puts Jio Platforms at an equity value of 4.9 trillion rupees and an enterprise value of 5.15 trillion rupees. It represents a 12.5% premium to the equity valuation of the Facebook investment, according to Reliance Industries.
"In the wake of the severe economic disruptions caused by the COVID-19 pandemic, globally and especially within India, this partnership with one of the most renowned tech-investors globally, Silver Lake, has special significance," the company said in a statement, adding comprehensive digitization would be vital for the revitalization of the Indian economy.
"We are excited to leverage insights from [Silver Lake's] global technology relationships for the Indian digital society's transformation," the statement quoted Mukesh Ambani, Reliance Industries' Chairman and Managing Director, as saying.
Silver Lake is a major global tech investor with approximately $40 billion in combined assets under management and committed capital. Among its holdings are investments in Airbnb, Alibaba, Ant Financial, Alphabet's Verily and Waymo units, Dell Technologies and Twitter.
According to the statement, Egon Durban, Silver Lake co-CEO and managing partner, said Jio Platforms has brought extraordinary engineering capabilities to bear on bringing the power of low-cost digital services to a mass consumer and small businesses population. "The market potential they are addressing," Durban said, "is enormous."
Moody's Investors' Service said Silver Lake's investment in Jio further showed Reliance Industries' ability and willingness to monetize its digital services business and reinforced the company's commitment to achieve a zero net debt position by March 31 next year.
"Investment by Silver Lake is priced at a premium to [the] recently announced investment by Facebook Inc. and establishes another pricing benchmark for Jio Platforms," Vikas Halan, a senior vice president said.
"Including the recently announced rights issue ($7 billion) and investments by Silver Lake and Facebook Inc., RIL has announced initiatives that could reduce net debt by about $13.6 billion from reported net debt of $21.4 billion as on 31 March 2020," he added.
Additional reporting by Ojaswi Rao in Mumbai