Reliance Jio's fibre business prepares Rs 27,000 crore war chest to fund expansion
Reliance Jio Infocomm's fibre business unit plans to raise Rs 27,000 crore through syndicated loans from a consortium of banks to expand capacity in order to meet the demand for its assets from sectors such as power, telecom and internet service providers. The lenders in the group include ICICI Bank, Axis Bank, State Bank of India and Punjab National Bank, unnamed sources told The Economic Times.
The latest entrant into the Indian telecom market has demerged its fibre and tower business into two units — Jio Digital Fibre Pvt Ltd and Reliance Jio Infratel Pvt Ltd. The assets were hived off in March, with an aim to monetise those through a sale and leaseback or InvIT (Infrastructure Investment Trust) structure. The loan, which will be used by Jio Digital Fibre, will mature in two years and would cost 8.35-8.85%.
"The loan is primarily aimed at facilitating the demerger process through which the fibre business emerges as a standalone subsidiary," a person in the know of things told the newspaper. The funds will be used by the company to expand its data network and attract users from other companies and businesses. "Other telecom players can use this fibre network…even those in the power industry can use these assets," an industry expert said.
Importance Of Fibre
As mobile data consumption in the country grows a robust backend infrastructure is a necessity to support the burgeoning demand. Over 300-million-subscriber strong Jio has also bought stakes in a bunch of content companies and is venturing into fibre-to-home broadband services. The telecom major needs expansive tower and fibre coverage to offer seamless broadband services. Industry peers Bharti Airtel and Vodafone Idea, too, have either separated or are in the process of hiving off their fibre assets. Owning an industry-leading and reliable fibre network has become the new battleground for telecom companies as customers seek uninterrupted and fast data services in the country.
Out of the total 270 billion rupees, around 110 billion or 40 percent come from State Bank of India. Punjab National Bank and ICICI Bank will advance 50 billion rupees each, while Axis Bank has offered 60 billion rupees. These loans are also expected to help the banks, struggling with a pile of bad loans, improve their credit growth profiles. "Given the growing data consumption and increasing smartphone penetration, this provides RJIL (Reliance Jio Infocomm) significant competitive advantage," rating company CRISIL had said in a note in February.