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Brookfield-led team inks $3.7-billion deal to buy out Reliance Jio’s tower arm

Reliance Industries on Friday disclosed that Canada’s Brookfield Infrastructure Partners L.P. and its affiliates will invest Rs 25,215 crore ($3.66 billion) in telecom tower assets of the Indian conglomerate. This multi-stage deal to acquire Reliance Jio lnfratel’s tower unit marks it as the single-biggest private-equity deal ever in India.

“Reliance Industrial Investments and Holdings, a wholly-owned subsidiary of Reliance Industries has entered into an agreement with BIF IV Jarvis India, an affiliate of Brookfield Asset Management Inc. for an investment by Brookfield (along with co-investors) of Rs 25,215 crore in the units proposed to be issued by the Tower Infrastructure Trust,” the company said in a regulatory filing.

“This is the single largest foreign investment in an Indian infrastructure vehicle,” RIL said adding that Brookfield’s investment is subject to stipulated government and regulatory approvals.

Under the deal, Reliance Industrial Investments & Holdings, the sponsor of Tower Infrastructure Trust, would issue units in the trust to Brookfield affiliate BIF IV Jarvis India and some co-investors. After the deal is closed, the Canadian alternative assets manager, Brookfield and its partners would become the sponsors of the trust, holding 100 per cent of India’s largest telecom tower company with 170,000 towers through Tower Infrastructure Trust, while the Reliance Industries subsidiary would become a co-sponsor, although will hold no units.

“With Rs 25,000 crore, they will buy out 100 per cent of the equity of the operating tower company and they can inject balance amount into the operating company through debt,” RIL Joint CFO V Srikanth said.

“Proceeds from the investment by Brookfield and long-term loans will be used to repay existing financial liabilities of RJIPL, including loans extended by Reliance”, RIL said in the regulatory filing, while presenting the company’s unaudited financial results.

“All the dues that RIL has to the tower company will get repaid, that is 12,000 crore. We had invested in the towers and we have now exited the towers, meaning we have now been able to sell it and realise the (value) and same thing we will do for fibre,” Srikanth said.

“This is a significant step forward in optimizing the capital structure of the digital and infrastructure businesses. The transaction validates the value unlocked through spin-off of passive infrastructure assets of Jio through the InvIT structure,” RIL said in a press release.

The trust, which is sponsored by RIL’s wholly-owned unit Reliance Industrial Investments and Holdings Ltd, an entity to which the tower assets undertaking of Reliance Jio were recently transferred, holds a 51 per cent stake in telecom tower operator Reliance Jio lnfratel Private Limited (RJIPL). RIL itself owns 49 per cent of Reliance Jio lnfratel.

“Proceeds from the investment by Brookfield will be used to repay certain existing financial liabilities of RJIPL and acquiring the balance 49 per cent of equity share capital of RJIPL, currently held by RIL,” the filing noted.

Reliance Jio lnfocomm Ltd., that previously held under RIL’s telecom services arm, had demerged the tower and fibre businesses in the quarter ended March 30, 2019, into Jio Digital Fibre Pvt Ltd and Reliance Jio Infratel Pvt Ltd, respectively.

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