Reliance Jio raises Rs 10,000 crore through non-convertible debentures

Money is pouring into Mukesh Ambani's telecom venture, Reliance Jio Infocomm. Market sources claim Life Insurance Corporation of India has made a sizeable investment in the company, subscribing to its Rs 10,000 crore privately placed debentures (PPD).

This is the third and largest PPD from Reliance Jio. The company had earlier raised a total of Rs 2,000 crore through two PPDs.

RIL, however, denied any such development. A spokesman for the company said in an emailed reply: "The information is incorrect."

Meanwhile rating agency Crisil on February 10 this year assigned an AAA/Stable rating to the Rs 10,000 crore unsecured non-convertible debenture (NCD) PPD 3 of Reliance Jio Infocomm. According to Crisil, the high rating given to PPD 3 is due to the company's strategic importance, its strong management team and the financial support it can expect from parent Reliance Industries Ltd (RIL).

As on December 31, 2014, RIL had invested around Rs 12,000 crore in Reliance Jio in the form of equity and preference shares. RIL has also guaranteed Reliance Jio's debt obligation of Rs 10,000 crore. The total estimated cost of rolling out the telecom service is estimated to be around Rs 65,000 crore.

"Reliance Jio will face significant execution and implementation risks in rolling out its telecom services," says Ramraj Pai, President, Crisil Ratings in its report on the company.  "But... it is uniquely placed with respect to offering 4G telecom services, as it is the only player with a pan India licence. Also Reliance Jio becomes the only player that can offer voice telephony along with high speed data on 4G under a single license at a pan India level."

In October last year Reliance Jio obtained a unified licence for all 22 service areas across India - the first telecom operator in the country to do so.

Late last month Business Today had reported that RIL had made an equity infusion close to Rs 7,500 crore in Reliance Jio. Earlier this week the company tied-up with Bharti Infratel to utilise the latter's tower infrastructure. There are reports that Reliance Jio is likely to launch 4G services from September 2014 starting in Delhi and Mumbai. But it is clear that in an industry struggling with skewed margins and with several well-entrenched players like Bharti Airtel, Vodafone and Idea, Ambani too is getting ready for the long haul by loading himself with sufficient cash to fight the biggies.