So, in today’s article, we will find out about the deal between JIO – Facebook, Saudi Aramco, Silverlake, Vista equity, General Atlantic, KKR, and Reliance Rights issue.
JIO
Jio started in the year 2007 as Reliance Jio Infocomm Limited 13 years ago. Yes, 2007 not 2016, and disrupted the whole telecom sector with its free internet and voice call. If you want to read more on JIO click here.
THE DEAL
Cooking is a form of art. While cooking a Biryani, you marinate the chicken with curd, spices, mint, lemon, onions, coriander, SALT, and many more. After cooking it for maybe 30-40 minutes, your Biryani is ready to eat. But, unfortunately, you have put more SALT; and you are unable to eat it. So, theirs two options, you either throw it like you don’t care or you add more rice, spices, lemon, mint, and others (of course no salt now); then mix it with the previous one. Now, the new biryani is tastier than ever, and everyone wants to try it.
If you are still wondering why the hell I am talking about Biryani? Wait, because the previous Biryani is Reliance, the excess SALT is the debt (loan), the new biryani is JIO, and everyone wants to taste the new biryani.
In simple, to reduce the debt of Reliance. The company is wooing investors to invest in the company, and in-turn gets a shareholding in the JIO.
THE DEBT
Reliance had a gross debt (loan) of Rs. 2,87,505 crore in the year 2019. So, in August 2019, Mukesh Ambani announced that in the next 18 months Reliance Industries Limited will be a zero net-debt company. As a result, he had to make some deals with other companies and venture capital to get investment.
SAUDI ARAMCO
Firstly, Reliance made a deal with a Saudi Arabian company called SAUDI ARAMCO. SAUDI ARAMCO is the world’s largest company by revenue and the most profitable company in the world. So, Reliance planned to sell 20% of its stake (only oil-to-chemicals, not jio) to Saudi Aramco and raise Rs. 1.14 lakh crore. But, due to some problems, this deal is on hold for a while.
Facebook bought a 9.99% stake in JIO platforms, which accounts for Rs. 43,574 crore. This will reduce the debt of Reliance and provide Facebook’s features like data and ads to target consumers and WhatsApp’s 400 million user base along with its upcoming WhatsApp pay combining with Jio’s 400 million user base which will play a key-role in JIOMART. To know more about JIOMART click here.
VENTURE CAPITALS
Venture capital (VC) is a form of private financing institution which provides funds to start-ups, emerging companies, and more that have high growth potential, and in return they get ownership in those companies.
Silver Lake is one of the VC companies that invested Rs 5,655.75 crore in JIO platforms. Silver Lake is known for its investments, including in firms such as Airbnb, Alibaba, Ant Financial, Alphabet’s Verily and Waymo units, Dell Technologies, and Twitter.
Vista Equity Partners has invested ₹11,367 crore in JIO Platforms for a 2.32% stake.
General Atlantic has invested Rs.6598 crore for a 1.34% stake. General Atlantic is well known for its investments in Airbnb, Alibaba, Facebook, DMart, Byju’s, Uber, Unacademy, Absolute Barbeque, Snapchat, Kaspersky Lab, Uber, and many more.
KKR (not Kolkata Knight Riders) bought 2.32% stake at Rs. 11,367 crores in JIO platforms.
RIGHTS ISSUE
A rights issue is an invitation to existing shareholders to purchase additional new shares in the company at a discounted price. Reliance is also issuing rights issue to the existing shareholders to raise a capital of Rs. 53,125 crore to reduce its debt.
Even in the future we might see a lot of ventures and companies invest and tie-up with Reliance.
Thank you for reading hope to see you in the next one.