Jio Platforms to Use IPO Funds to Cut Debt by $3 Billion

A draft IPO paperwork revealed that Jio Platforms Ltd. intends to repay its telecom unit's over $3 billion in external commercial borrowings with a portion of the funds from its proposed initial share offering. On June 19, the preliminary paperwork for an IPO involving the issuing of up to 270 million additional shares was submitted by Jio.

Consequently, the much-anticipated procedure of releasing shareholder value has now begun. No information regarding the possible IPO size was included in the draft paper. Although some of the 275 billion rupees ($2.9 billion) would go toward paying off existing debt, the rest will likely go toward general corporate objectives.

How the IPO will Benefits Jio Platforms?

According to the paper, its telecom unit, Reliance Jio Infocomm Ltd., has three so-called ECB facilities with a combined value of 300.6 billion rupees (in both dollar and yen terms). Members of the lending group include Citibank, BNP Paribas, Citigroup, Barclays Bank Plc, Bank of America Corp., and Australia & New Zealand Banking Group Ltd. The draft deal states that the borrowings will be returned, in whole or in part, from the net proceeds of Jio Platforms' initial public offering (IPO).

According to Jio Platforms' draft herring prospectus, these prepayments will contribute to lowering net debt and related servicing costs. It went on to say that the firm thinks an IPO will help it raise more money for future business expansion prospects. With the balance sheet deleveraged, Jio Platforms will be in a better position to keep investing in its strategic priorities. 5G network growth and densification, fixed broadband penetration, artificial intelligence, and cloud services are among these priorities.

Jio’s Recent Financial Outlook

With over 524 million subscribers, Jio is the biggest digital platform in India. There are 268 million people using its 5G network, and 13 million homes are already connected with JioAirFiber. A net profit of INR 7,935 crore was announced in the fourth quarter by Jio Platforms, the telecom and digital services division of Reliance Industries.

Sequentially, the net profit increased by 4%, and year-over-year, it increased by 13%. Higher financing costs, which rose 66% year-on-year during the quarter as a result of the utilisation of 5G spectrum assets, somewhat offset the gain in earnings. In line with market expectations, operational revenue increased 2.7% quarterly and 12.6% annually to INR 38,259 crore. The business claims that hike in digital service expansion, robust subscriber additions, and average revenue per user (Arpu) all contributed to the revenue rise.