Abu Dhabi Investment Authority and Saudi Arabia’s Public Investment Fund to invest $1b in Jio fibre assets

MUMBAI: Ending almost a year of negotiations, Reliance Industries Ltd (RIL) announced a $1 billion investment from Abu Dhabi Investment Authority (ADIA) and Saudi Arabia’s Public Investment Fund (PIF) in the infrastructure investment trust (InvIT) formed to monetise its fibre optic network assets.
The two sovereign wealth funds will invest Rs 3,779 crore each ($506 million) to acquire a total 51% in Digital Fibre Infrastructure Trust (DFIT), the InvIT established by Reliance, the company said in its presentation.

The remaining 49% will be held by various Reliance entities that are also investing around $1 billion. Of this, Reliance Industrial Investments and Holdings Ltd (RIIHL) will invest $300 million as trust sponsor. Another $650-675 million will be deployed by various entities of Reliance and the Ambani family office. ET broke the story online earlier on Friday.

ET was also the first to report on August 21 that PIF had joined negotiations after ADIA re-engaged with Reliance following a hiatus. On October 3, ET reported that the $1 billion investment decision had been firmed up.

RIL looking to raise Rs 39,700 crore

DFIT will raise an additional Rs 25,000 crore by way of loans from local banks, including State Bank of India, HDFC Bank, Union Bank of India and ICICI Bank, ET reported.

The fibre optic network assets are held by Jio Digital Fibre, which is 51% owned by DFIT and 48.44% by RIL. It owns and operates a pan-India operational optic fibre cable network, pegged at about 17.37 million fibre pairs per kilometre (FPKM) at the end of FY20. By the end of the current fiscal year, this is pegged at 21 million FPKM.

As with its Jio tower trust, this too will be a 30-year sale and buyback agreement between Reliance and the investors. The investors are expected to get a minimum, or floor, 12% internal rate of return on equity invested with an upside accrued from non-captive sales, said people with knowledge of the matter. While about 58% of the fibre capacity is expected to be used by Jio alone for its own subscribers, the rest will be for third-party users, as per the terms of agreement.

According to documents filed with the Securities and Exchange Board of India (Sebi), DFIT plans to raise Rs 14,700 crore by issuing 1.47 billion units, priced at Rs 100 a piece, to investors via a private placement. In all, RIL is looking to raise Rs 39,700 crore by monetising its fibre optic network assets housed in Jio Digital Fibre.

According to the Sebi filing, DFIT will eventually lend the entire Rs 39,706 crore to Jio Digital Fibre, which will use it to repay debt, including suppliers’ credit. The fibre optic unit, earlier a part of RIL’s telecom arm, Reliance Jio Infcomm, has debt of Rs 87,296.3 crore, including suppliers’ credit.

After almost a year, Reliance has got all the regulatory approvals needed for selling its Jio tower InvIT to Brookfield and other co-investors for Rs 25,215 crore ($4 billion). That and unlocking value in its fibre assets are part of a series of time-bound asset-monetisation initiatives to pare debt. RIL had transferred its tower and fibre assets to two special purpose vehicles (SPVs) owned by two Sebi-registered InvITs.

“We have now completed the transaction,” said Anshuman Thakur, head of strategy at Reliance Jio Infocomm, at the results announcement. "The assets continue to be developed and operated given the criticality... We have found the right partners for both the InVits.”

ADIA and PIF have already invested $2.2 billion in Jio Platforms as part of its mega fundraising plans. They also invested in Reliance Retail subsequently. There was an expectation that GIC of Singapore would join the consortium but that has not happened yet.