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Highlights
- Reliance Jio is back in attention as IPO process moves ahead with Reliance Industries finally filing the DRHP (Draft Red Herring Prospectus).
- Jio Platforms, in its DRHP, has mentioned that it plans to use the proceeds from the IPO to clear the existing debt.
- This will help the company in reducing leverage from its financial books and then fuel the next phase of growth more peacefully.
Andrew Bonwick
Vice President of Product Development at Relm Insurance
Madhav Sheth
CEO of Ai+ Smartphone
Stephen Rose
CEO Render Networks
Reliance Jio, the largest telecom operator in India, is back in attention as IPO (initial public offering) process moves ahead with Reliance Industries finally filing the DRHP (Draft Red Herring Prospectus). Jio Platforms, in its DRHP, has mentioned that it plans to use the proceeds from the IPO to clear the existing debt. This will help the company in reducing leverage from its financial books and then fuel the next phase of growth more peacefully. A lower debt on the books also means that any new fundraise via debt is with a lower interest rate, resulting in savings of thousands of crores in the long run for a company such as Jio.
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How will Jio Utilise the IPO Money?
Reliance Jio could use up to Rs 27,500 for clearning debt from its books, and some amount would be used for general corporate purposes, the DRHP said. Jio said that deleveraging will allow it to continue its investments in strategic priorities, including 5G network densification, and expansion, along with things such as fixed broadband penetration, AI (artificial intelligence) and cloud services, enterprise digital services, and international technology partnerships.
Reliance Jio has a healthy cash flow. While it can reduce the debt from its books simply by paying instalments, that would be a slower process. Further, it would also reduce the telco’s ability to continuing investments on new technologies and building things such as data centers, telecom gear, and more.
With IPO proceeds, Jio will be able to remove debt from its books faster, and also raise fresh debt money at a lower interest rate. Jio’s IPO timeline is not yet clear. With the markets seeeing a high inflation, and a negative outlook towards the growth of the capital markets, Reliance Industries will likely take its sweet time before it goes ahead with the IPO.
