Rating Rationale
June 26, 2023 | Mumbai
Jio Digital Fibre Private Limited
'CRISIL AAA / Stable' assigned to Non Convertible Debentures
 
Rating Action
Total Bank Loan Facilities RatedRs.75342 Crore
Long Term RatingCRISIL AAA/Stable (Reaffirmed)
 
Rs.3000 Crore Non Convertible DebenturesCRISIL AAA/Stable (Assigned)
Rs.5000 Crore Commercial PaperCRISIL A1+ (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has assigned its ‘CRISIL AAA/Stable’ rating to the Rs 3,000 crore non-convertible debentures of Jio Digital Fibre Private Limited (JDFPL) while reaffirming its ‘CRISIL AAA/Stable/CRISIL A1+’ ratings on the bank loan facilities and debt programmes of JDFPL.

 

The ratings continue to centrally factor in the strategic importance of JDFPL to Reliance Jio Infocomm Ltd (RJIL; rated ‘CRISIL AAA/Stable/CRISIL A1+) and the strong business linkages between the two entities. The ratings also reflect the growing cash flow of JDFPL because of the long-term agreement with RJIL and limited downside risks to profitability given the fixed-price terms of its project execution and operations and maintenance (O&M) agreements with pass through of cost escalations.

 

RJIL, as an anchor tenant, has entered into an agreement with JDFPL (fibre and duct use agreement or FUA), wherein it has contracted about 60% of JDFPL’s fibre capacity for 30 years. This provides strong cash flow visibility to JDFPL.

 

The demand for fibre-based, high-speed fixed broadband network (fibre to the premise [FTTP]) is expected to be driven by continued surge in overall data consumption in India. Furthermore, fibre backhaul will be critical to support increased demand for mobile broadband services, particularly for offtake of 5G technology. JDFPL, with its industry-leading, extensive and high-quality fibre network, is therefore critical for RJIL’s operations.

 

Given the rise in demand for fibre, JDFPL has increased its planned capacity to about 28 million fibre pair kilometers (FPKM) from earlier planned capacity of around 21 million FPKM. JDFPL current capacity stands at 27.7 million FPKM and remaining capacity as planned is envisaged to be completed in first half of fiscal 2024.

 

The external debt at JDFPL stands at Rs 79,264 crores, as on April 26, 2023, and is unlikely to go beyond Rs 91,428 crores (as per permitted indebtedness agreed with the lenders) after completion of planned capacity. Further, JDFPL has borrowed an aggregate of Rs 52,620 crore from its parent Digital Fibre Infrastructure Trust (DFIT), a SEBI registered infrastructure investment trust (“Trust”), that includes an amount of Rs. 12,914 crores for the purpose of funding the new planned capex.  However, these loans from the Trust are subordinate to the external debt. CRISIL Ratings also understand that the Company is in the process of tying up further loans from external lenders to fund the remaining expansion of fiber capacity.

 

Nevertheless, the financial risk profile of JDFPL is likely to continue to remain strong, driven by comfortable average debt service coverage ratio (DSCR) on external debt. This also takes into account the fact that JDFPL's FUA with RJIL supports the servicing of external debt in a timely manner even after factoring the additional external debt required for expansion of fibre capacity. Moreover, the high quality and long life of underlying assets should aid in refinancing at favourable terms, if required.

 

The strengths are partially offset by susceptibility to revenue and counterparty risks from external tenants.

Analytical Approach

CRISIL Ratings has considered the standalone business and financial risk profiles of JDFPL. CRISIL Ratings has also factored in the regulatory requirements for special purpose vehicles (SPVs) of infrastructure investment trusts.

Key Rating Drivers & Detailed Description

Strengths:

Strong business linkage with and strategic importance to RJIL

Given the supply side constraints in the industry, combined with rising increase in data consumption, JDFPL is strategically important to RJIL. Moreover, JDFPL’s fibre network is critical for the seamless functioning of the mobile network of RJIL. The O&M and project execution partners are RIL group entities, which also underscores the business linkages.

 

Strong cash flow visibility and minimal downside risks to profitability

The long-term FUA with RJIL for about 60% of capacity results in strong revenue visibility for JDFPL, given the strong counterparty. With ongoing capacity expansion under the second phase, the revenue shall also increase driven by additional contract from RJIL. Moreover, contracting with third parties provides an upside to revenue, as demand for fibre is expected to continue to increase in the near term with the ongoing rollout of 5G services.

 

Profitability of JDFPL is exposed to limited risks, given the fixed fibre usage fees by RJIL, fixed O&M costs and pass through of any increase in operating cost such as repairs/replacements of optical fibre. Additionally, project execution risks are being borne by the contractor and fibre capacity gets transferred to JDFPL only post completion, and at a fixed price.

 

Comfortable financial risk profile

JDFPL has a comfortable financial risk profile marked by stable cash accrual and a healthy DSCR for the rated external debt, based on the FUA with the anchor tenant and expected increase in external debt.

 

Weakness:

Susceptibility to revenue and counterparty risks related to external tenants

Limited players in the Indian telecom sector could constrain the third-party tenancies for JDFPL. Moreover, the telecom sector is susceptible to technological changes and is competitive, which could impact cash accrual and thereby leverage ratio of telecom companies. This may expose JDFPL to counterparty risks related to external tenants. Till now, there has been limited uptake of fibre infrastructure from third-party entities. Nevertheless, JDFPL has a healthy DSCR for the rated external debt, based on revenue from the anchor tenant only.

Liquidity: Superior

Stable cash flow with minimum downside risks based solely on the anchor tenant payments from RJIL is expected to cover external debt obligations, resulting in healthy DSCR for the rated senior external debt. Also, the long term FUA with RJIL supports the servicing of senior external debt in a timely manner. Moreover, the high quality and long life of underlying assets should aid in debt refinancing at favourable terms, if required.

Outlook: Stable

JDFPL will continue to benefit from stable cash flow due to the long term FUA with RJIL.

Rating Sensitivity factors

Downward factors

  • Weakening in credit profile of RJIL or any change in the strategic importance of the company to RJIL.
  • More than expected capex resulting to total external debt exceeding beyond Rs 91,428 crores

About the Company

JDFPL is registered with the Government of India, Ministry of Communications, Department of Telecommunications as an Infrastructure Provider Category I (IP-I) service provider. JDFPL is a ‘SPV’ in terms of the SEBI (Infrastructure Investment Trusts) Regulations, 2014, as amended, with the Trust holding 51% of its the equity share capital and the balance 49% being held by RIL and certain minority shareholders. Reliance Industrial Investments and Holdings Limited, a wholly owned subsidiary of RIL, is the sponsor of the Trust.

Key Financial Indicators

Particulars Unit 2023 2022
Revenue Rs crore 15,496 11,712
Profit after tax (PAT) Rs crore -2,991 -4,151
PAT margin % NM NM
Interest coverage Times 1.2 1
Adjusted debt/networth Times NM NM

NM: Not meaningful because the figures are negative

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of instrument Date of
allotment		 Coupon
rate (%)		 Maturity
date		 Issue size
(Rs crore)		 Complexity 
levels		 Rating assigned
with outlook
NA Term Loan – 1  NA NA Dec-32 16555 NA CRISIL AAA/Stable
NA Term Loan – 2 NA NA Dec-32 6825 NA CRISIL AAA/Stable
NA Term Loan – 3 NA NA Dec-32 3500 NA CRISIL AAA/Stable
NA Term Loan – 4 NA NA Dec-32 3294 NA CRISIL AAA/Stable
NA Term Loan – 5 NA NA Dec-32 17326 NA CRISIL AAA/Stable
NA Term Loan – 6 NA NA Dec-32 2500 NA CRISIL AAA/Stable
NA Term Loan – 7 NA NA Dec-32 6900 NA CRISIL AAA/Stable
NA Term Loan – 8 NA NA Mar-29 1750 NA CRISIL AAA/Stable
NA Term Loan – 9 NA NA Dec-32 5500 NA CRISIL AAA/Stable
NA Term Loan – 10 NA NA Dec-32 2500 NA CRISIL AAA/Stable
NA Term Loan – 11 NA NA Dec-32 1500 NA CRISIL AAA/Stable
NA Term Loan – 12 NA NA Dec-32 1245.9 NA CRISIL AAA/Stable
NA Proposed Term Loan NA NA NA 5946.1 NA CRISIL AAA/Stable
NA Commercial paper NA NA 7-365 days 5000 Simple CRISIL A1+
NA Non-Convertible Debentures# NA NA NA 3000 Simple CRISIL AAA/Stable

# Yet to be placed

Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 75342.0 CRISIL AAA/Stable 28-04-23 CRISIL AAA/Stable 07-07-22 CRISIL AAA/Stable 29-09-21 CRISIL AAA/Stable 15-12-20 CRISIL AAA/Stable CRISIL AAA/Stable
      --   -- 01-04-22 CRISIL AAA/Stable 06-04-21 CRISIL AAA/Stable 30-05-20 CRISIL AAA/Stable --
Commercial Paper ST 5000.0 CRISIL A1+ 28-04-23 CRISIL A1+ 07-07-22 CRISIL A1+ 29-09-21 CRISIL A1+ 15-12-20 CRISIL A1+ CRISIL A1+
      --   -- 01-04-22 CRISIL A1+ 06-04-21 CRISIL A1+ 30-05-20 CRISIL A1+ --
Non Convertible Debentures LT 3000.0 CRISIL AAA/Stable 28-04-23 Withdrawn 07-07-22 CRISIL AAA/Stable 29-09-21 CRISIL AAA/Stable 15-12-20 CRISIL AAA/Stable --
      --   -- 01-04-22 CRISIL AAA/Stable 06-04-21 CRISIL AAA/Stable   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Proposed Term Loan 5946.1 Not Applicable CRISIL AAA/Stable
Term Loan 2500 ICICI Bank Limited CRISIL AAA/Stable
Term Loan 3294 Bank of Baroda CRISIL AAA/Stable
Term Loan 17326 HDFC Bank Limited CRISIL AAA/Stable
Term Loan 6825 Axis Bank Limited CRISIL AAA/Stable
Term Loan 3500 Punjab National Bank CRISIL AAA/Stable
Term Loan 6900 Bank of Baroda CRISIL AAA/Stable
Term Loan 16555 State Bank of India CRISIL AAA/Stable
Term Loan 1750 IndusInd Bank Limited CRISIL AAA/Stable
Term Loan 5500 Housing Development Finance Corporation Limited CRISIL AAA/Stable
Term Loan 2500 Kotak Mahindra Bank Limited CRISIL AAA/Stable
Term Loan 1500 Indian Bank CRISIL AAA/Stable
Term Loan 1245.9 Union Bank of India CRISIL AAA/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Understanding CRISILs Ratings and Rating Scales

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