Does Mukesh Ambani need Softbank’s money to give Reliance Jio a greater flight?


APRIL 25, 2019

For India’s biggest startups – Paytm, Oyo, Policybazaar, among others – Softbank has almost always been a one-way ticket for the unicorn club. But SoftBank’s Chairman and CEO Masayoshi Son’s next bet may be the ‘startup’ from the country’s richest man. But does Mukesh Ambani really need Softbank’s money?

Instead of betting on ‘internet’ entrepreneurs, Son may be looking to bet on the company that is at the centre of India’s digital revolution, Reliance Jio.

India’s most talked about telecom network – Reliance Jio – is reportedly in talks with Japanese investment firm Softbank for an investment. The Economic Times report said that the Softbank Vision Fund may pump in $2-3 billion in Mukesh Ambani’s Jio.

Then again, why does one of India’s most-valuable companies need such huge fund infusion? Jio reported a debt of ₹76,212 crore at the end of the March 2019 quarter. Much of it had piled up in making Jio the force it is today.

However, Reliance’s telecom business needs more money to boost its infrastructure. So, with Softbank coming on board, it would be able to deal with a large amount of the current debt without compromising on the investment required to sustain the growth.

“The debt in their balance sheet has been created for the purpose of building infrastructure for fibre and telecom towers. They would have the wisdom to deleverage the balance sheet and bring down their debt, capitalize the opportunity,” Deven Choksey, CEO & MD, K.R. Choksey Shares & Securities Private Ltd. told Business Insider.

Choksey also believes that it’s a win-win for all – Softbank, Reliance and its shareholders.

Softbank, which so far in India has been funding startups and has a stake in almost every other Indian unicorn, could look at Jio as a great investment to further establish a stronghold in India’s internet journey.

“Jio is a complete solution provider by integrating various subscriptions – mobile, landline internet and cable TV – under one network. This is going to be the biggest driver of data in the country and they have the reach for that purpose. Certainly, the investment interest of any global banker or investor will be there. These kinds of prepositions aren’t easily available,” said Choksey.

Choksey further added that Jio’s last quarter results show that an average user is consuming 11 GB data per month and this will go up after 5G, which makes it an opportune time for an investor to come in.

Courtesy/Source: Business Insider