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Reliance Industries' net debt to fall 75% post Vista Equity deal

Reliance Industries' net debt to fall 75% post Vista Equity deal

Reliance Industries' net debt to fall 75% post Vista Equity deal
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By Pranati Deva  May 8, 2020 1:57:08 PM IST (Updated)

Vista Equity Partners, a US-based private equity firm will buy a 2.32 percent stake in Jio Platforms for Rs 11,367 crore

Reliance Industries (RIL) net debt will fall 75 percent after investment by Vista Equity Partners, a US-based private equity firm. This will be the third high profile investment in Reliance Industries' technology arm in less than a month after the Facebook and Silver Lake investments.

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Vista Equity Partners, a US-based private equity firm will buy a 2.32 percent stake in Jio Platforms for Rs 11,367 crore, Reliance Industries announced on Friday. This comes days after private equity firm Silver Lake said it will invest nearly Rs 5,655.75 crore in its digital arm Reliance Jio Platforms for 1.1 percent stake. Earlier, the company secured a Rs 43,574 crore investment from Facebook for a 9.99 percent stake, boosting its efforts to cut debt.
Along with these, the upcoming (Rs 53,125 crore) rights issue and a previous investment by British Petroleum in FY2019-20 (Rs 7,000 crore) have led to this massive decline in RIL's debt.
Last year, the company had a net debt of Rs 1.61 lakh crore, built up as it undertook capital expenditure over the past few years in expanding its telecom and retail ventures, as well as a few projects on the refining side. Of that, the company has already raised Rs 1.2 lakh crore counting in the latest investment.
The latest round of investment values Jio Platforms at an equity value of Rs 4.91 lakh crore and an enterprise value of Rs 5.16 lakh crore. The price is the same as the one paid by US-based private equity firm Silver Lake for a 1.15 percent stake in Jio Platforms a few days back. Vista is now the third-largest investor in Jio Platforms behind Reliance Industries and Facebook.
"With strong visibility to these equity infusions, the Board was informed that RIL is set to achieve net-zero debt status ahead of its own aggressive timeline," the company said.
For the March quarter, the company declared revenue of Rs 1.36 lakh crore and an adjusted profit of Rs 10,813 crore. Its net profit after accounting for a one-time COVID-related impact stood at Rs 6,546 crore.
As per Nitin Soni of Fitch, this deal will re-rate RIL as its balance sheet situation will improve. An upgrade of the company looks possible, he added. He further noted that net adjusted debt-EBITDA for Reliance will come down below 1.5 times post the deal.
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