Highlights:
- Reliance Industries Limited decides to sell stakes to Facebook in its digital business
- RIL gained over 10% after the news hit the market
- Facebook will buy 9.99% stake in Reliance Jio
On Wednesday, the share of Mukesh Ambani’s Reliance Industries Limited (RIL) saw a surge of 8.3% in the early hours as the company announced it will sell the stake of its digital business to Facebook Inc. At around 1:19 PM, the shares of RIL traded at 1,359.65, on BSE, up 10.3%.
The wholly-owned subsidiary of Reliance Industries Limited, Jio Platform will sell 9.99% equity stake to Facebook on a fully diluted basis. In a statement from RIL, it was said tha “Reliance Industries Limited, Jio Platforms Limited and Facebook, Inc today announced the signing of binding agreements for an investment of ₹43,574 crore by Facebook into Jio Platforms.
This investment by Facebook values Jio Platforms at ₹4.62 lakh crore pre-money enterprise value ($65.95 billion, assuming a conversion rate of ₹70 to a US dollar,”.
Together with the investment, Reliance Retail Limited, Jio Platforms and Facebook owned messaging application WhatsApp have entered into a commercial partnership agreement to pace up Reliance Retail’s JioMart platform by connecting the nearby “kirana” shops with the customers and enabling home delivery over Jio’s mobile interface.
The statement said, “The companies will work closely to ensure that consumers are able to access the nearest kiranas who can provide products and services to their homes by transacting seamlessly with JioMart using WhatsApp,”.
Morgan Stanley was the financial advisor while AZB & partners and Davis Polk & Wardwell acted as the counsels on this transaction.
In a report dated 13th April, Goldman Sachs said that the investor queries highlights their concerns around RIL’s balance sheet free cash flow and debt adding that leverage has already been declining and will likely continue on this path in Financial Year 2021 as well.
The global brokerage firm said, “The complexity of RIL’s energy assets together with strong consumer earnings momentum should limit the degree of a sequential decline in earnings and drive a sharp turnaround in the second half of FY21,”.
The expected overall Earning Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for the RIL to have declined 8% quarter-on-quarter in Q4 of FY20, said Goldman Sachs. It added the the PetChem earning are seen almost flat as the margins reached the trough in Q3 of FY20. It said, “We expect a steeper decline in refining due to inventory loss which will be partly offset by growth in telecom earnings,”.
