After Facebook, now PE firm Silver Lake to invest Rs 5,655 cr in Jio Platforms

Silver Lake's portfolio includes Airbnb, Alibaba, Ant Financial and Twitter

Mukesh-Ambani-Reliance-Jio Mukesh Ambani | File

Days after Reliance Industries (RIL) announced a massive Rs 43,574 crore deal with social networking giant Facebook, private equity firm Silver Lake is set to invest Rs 5,655.75 crore in Jio Platforms. Jio Platforms is a wholly owned unit of RIL that is bringing together Jio’s digital apps, digital ecosystem and high speed connectivity under one umbrella.

What’s important is the deal with Silver Lake is at a 12.5 per cent premium to the equity valuation of the Facebook investment announced on April 22. The investment will value Jio Platforms at an equity value of Rs 4.90 lakh crore and an enterprise valuation of Rs 5.15 lakh crore.

RIL shares were down 1.2 per cent at Rs 1,450 on the BSE on Monday morning. The wider Sensex was trading 4.8 per cent or 1,622.96 points lower at 32,094.66 points.

Silver Lake predominantly invests in technology companies and its other investments have included Airbnb, Alibaba, Ant Financial, Alphabet’s Waymo and Verily units, Dell Technologies and Twitter among others.

Egon Durban, the co-CEO and managing partner of Silver Lake, said the market potential that Jio Platforms is trying to address is enormous. “Jio Platforms is one of the world’s most remarkable companies, led by an incredibly strong and entrepreneurial management team who are driving and actualising a courageous vision. They have brought extraordinary engineering capabilities to bear on bringing the power of low-cost digital services to a mass consumer and small businesses population,” he said.

RIL is betting heavily on its consumer and technology divisions to drive the next leg of growth at a time a slump in crude oil prices weighs on its traditional oil and gas and refining business.

In the fourth quarter, RIL’s consolidated net profit tumbled 39 per cent year-on-year to Rs 6,348 crore, while revenue fell 2.3 per cent to Rs 139,283 crore.

“Through the quarter, oil prices declined 73 per cent, impacting inventory valuation,” the company said. Jio’s net profit in the January-March quarter stood at Rs 2,331 crore, up 178 per cent year-on-year, while operating revenue stood at Rs 14,835 crore, up 27 per cent.

“Higher debt in the standalone business as well as better valuations for tech/consumer businesses leads us to believe these two segments are the new core,” said Motilal Oswal Financial Services.

At the end of March, RIL’s gross debt stood at Rs 336,294 crore, while net debt was at Rs 161,035 crore.

On April 22, RIL announced a deal with Facebook, which will see the latter picking up a 9.99 per cent stake in Jio Platforms. Separately, it had announced a deal with British energy giant BP to sell a 49 per cent stake in the fuel retailing business. It had also announced plans last August to sell a 20 per cent stake in refining and petrochemicals business to Saudi Aramco.

It has also announced a rights issue of Rs 53,125 crore. All these deals are a part of RIL’s plans to become debt-free by the end of the financial year.