RIL to use over a third of Jio Infratel InvIT proceeds to repay banks

Mumbai: State Bank of India, Bank of Baroda and HDFC Bank are among those set to receive more than a third of the Rs 25,000 crore that Reliance Jio Infratel, the telecom tower business of Reliance Industries, plans to raise through a listing of the business as an investment trust, four people familiar with the matter said.

Reliance Industries (RIL), which is deleveraging the business by monetising some assets including the telecom business, is also likely to receive nearly Rs 10,000 crore from the listing as the trust is likely to repay some loans given by the parent company, the people said.

The transaction, which is likely to be completed before the end of the current fiscal year, will see RIL reduce debt and will allow Reliance Jio Infratel (RJIPL) — a special purpose vehicle (SPV) to house the company’s tower assets — to borrow funds on its own.

RIL will repay State Bank of India (SBI), Bank of Baroda (BoB), Punjab National Bank (PNB), ICICI Bank, HDFC Bank and Axis Bank before the end of the fiscal year.

In July, RIL said that Brookfield had agreed to invest Rs 25,215 crore to buy Reliance Jio’s tower infrastructure. The company had earlier transferred Jio’s tower assets to RJIPL, which in turn, was housed in a separate tower infrastructure trust or InvIT.

Following the deal, Brookfield will control the InvIT.

“The deal is awaiting final clearance from Sebi (Securities and Exchange Board of India), after which RIL will get the money and pay back the bank loans,” said one of the people cited earlier. SBI ( Rs 7,000 crore) has the largest exposure, while BoB has Rs 3,000 crore and HDFC Bank Rs 1,500 crore. The loans given out by other banks named earlier could not be independently ascertained.

RIL did not reply to an email seeking comment. SBI, BoB and HDFC Bank also did respond to ET’s queries.

Banks are also in the final stages of sanctioning loans to the SPV held by the InvIT.

In the second part of the transaction, the SPV will borrow from banks to fund its tower business.

“The whole idea of this transaction is that RIL debt comes down and is transferred to an SPV. The money thus raised will be used for working capital and for putting up more towers. Most banks have sanctioned these loans because the debt to equity ratio in the SPV is 1:1, which means it is almost risk-free,” said a second person familiar with the plans.

Jio has about 175,000 towers — either completed or under-development. These towers are predominantly ground-based with the ability to host multiple tenants, fibre-backhaul and battery back-ups.

The listed trust and the SPV could borrow on their books for future investments and that could run into thousands of crores of rupees, but it would not be a part of RIL’s debt.

Banks such as SBI, HDFC and Axis are likely to lend to the trust. The whole process could be completed by early March. “This is a safe bet for banks because there is no project risk and even assuming that Reliance Jio will only use the towers, given its size and domination in the Indian market, it is well placed,” said the first person cited earlier.