Silver Lake follows Facebook’s bet on Ambani’s Reliance Jio

The agreements will help the conglomerate deleverage and meet its target of being a net-debt free company before their timeline

MUMBAI • Reliance Industries Ltd said Silver Lake Partners will invest about US$753 million (RM3.24 billion) in its digital unit, days after Facebook Inc agreed to invest in the business, boosting the efforts of Asia’s richest man to cut debt at his conglomerate.

The investment by the California-based private-equity firm is priced at a 12.5% premium to Facebook’s US$5.7 billion deal for a 10% stake announced on April 22, Reliance Industries said in a statement yesterday. The transaction would give Jio Platforms Ltd an equity value of 4.9 trillion rupees (RM279 billion), the Indian company said.

The Silver Lake deal is the latest in a series of fund-raising plans by chairman Mukesh Ambani, 63, as the tycoon seeks to bolster investor confidence shaken by the coronavirus pandemic. The crash in crude oil prices caused profit at its energy and petrochemicals division to drop the most in nearly two decades last quarter. The collapse also added uncertainty in negotiations to sell an estimated US$15 billion stake in Reliance Industries’ oil and chemicals division to Saudi Arabian Oil Co (Aramco).

Ambani promised shareholders in August that he would cut the net debt at the group, whose businesses span oil refining, retail and telecommunications, to zero from about US$21 billion by March 2021. The key part of the plan was a deal with Aramco, as the Saudi oil producer is known. Last week, Reliance Industries said in a filing that talks with Aramco are progressing and it will manage to reach its debt target ahead of schedule.

The conglomerate’s 3.67% bonds due 2027 rose 0.4 cents on the dollar to 100.28 as of 11:40am in Hong Kong yesterday, the highest level since March 13, according to prices compiled by Bloomberg. The group’s 4.13% notes due 2025 jumped to the highest level since March 17 to 102.85 cents.

“The agreements will help the conglomerate deleverage and meet its target of being a net-debt free company before their timeline. That’s being rewarded by bondholders,” said Hemant Dharnidharka, CEO at Dharni Wealth, a financial-advisory services firm in Mumbai.

With the Aramco talks on course, Reliance Industries said it has sought regulatory approvals to carve out the oil and chemicals division. Investors have sought clues to the progress of negotiations with Aramco, helping drag the stock to a two-year low in March.

The shares have rebounded, gaining about 66% since the March 23 close, on renewed confidence in Ambani’s ability to attract investors.

Besides the stake sales, the board of the Mumbai-based firm last week approved a plan to raise about US$7 billion selling shares to existing investors. Shareholders will get one rights share for every 15 held, at 1,257 rupees each, or 14% lower than the closing price on April 30. Ambani and other members of the founding family who own stakes will subscribe to their entitlement and will also buy any stock left over, under the plan.

Shares of Reliance Industries fell 1.6% at 12:04pm in Mumbai yesterday, reflecting losses in global markets that have been weighed down by the impact of the pandemic. The stock rallied almost 32% in April, the biggest monthly jump since January 2006.

The tycoon, Asia’s richest person with a net worth of US$53 billion, is moving the company away from its energy-related businesses to faster-growing consumer segments including its digital platform and retail.

Reliance Industries said last Thursday that it has received interest from new potential global partners in taking a stake similar to the purchase by Facebook in Jio Platforms. Morgan Stanley was financial advisor to Reliance Industries in the Silver Lake agreement. Ambani also has plans for IPO listing for his non-energy businesses, he said last year. — Bloomberg