| Jio Platforms Limited | ||
| Rating Reaffirmed | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL A1+' rating on the commercial paper programme of Jio Platforms Limited (JPL).
JPL is the parent entity of Reliance Jio Infocomm Ltd (RJIL; 'CRISIL AAA/Stable/CRISIL A1+') and holds the digital services business of the RIL group. Digital services business is the group’s principal growth driver alongside retail. Apart from RJIL, JPL has investments in digital technology, including artificial intelligence, online education, and digital media and content, among others.
The rating continues to factor in RJIL’s leading market position in the Indian telecom industry and its strong operating performance. The rating also takes into account JPL’s strategic importance to the Reliance Industries Ltd (RIL; CRISIL AAA/Stable/CRISIL A1+) group. These strengths are partially offset by RJIL’s exposure to regulatory as well as technological risks.
The company’s operating performance remained strong and continued to improve sequentially, aided by sustained healthy performance of RJIL. Net subscriber addition for RJIL in Q1FY23 witnessed a strong rebound to 9.7 million driven by continued strength in gross adds (35.2 million) and reduced SIM consolidation impact, while average revenue per user (ARPU) improved to Rs 175.7 per subscriber per month from ~Rs 168 in the preceding quarter. Thus, JPL’s consolidated gross revenue in Q1FY23 was Rs 27,527 crore, higher by 23.6% on-year, driven by residual impact of tariff hike taken last year and increased uptake for Fibre-to-the-home (FTTH) services. Moreover, company also maintained industry leading earnings before interest, tax, depreciation and amortization (EBITDA) margin at 48.7% during the quarter (~50.5% for RJIL), despite inflationary pressure on operating costs.
RJIL also has off-take arrangements with special purpose vehicles (SPVs), including Jio Digital Fibre Pvt Ltd (JDFPL; CRISIL AAA/Stable/CRISIL A1+) and Summit Digitel Infrastructure Pvt Ltd (SDIPL; CRISIL AAA/Stable) for use of optical fibre and telecom tower infrastructure, respectively. Access to strong backhaul and national backbone network through these offtake arrangements provides RJIL significant competitive advantage, given the growing data consumption in India. |
Analytical Approach CRISIL Ratings has consolidated the business and financial risk profiles of JPL with its subsidiary, RJIL, owing to the former’s 100% ownership in the company, along with common management and operations. CRISIL Ratings has also applied its parent notch-up framework to factor in the intensity of support available to JPL from RIL. The support is expected to continue, given their strategic importance to RIL, and strong linkages with it. Deferred payment liabilities of RJIL to the Department of Telecommunication (DoT) towards acquisition of spectrum, have been considered as debt.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
RJIL purchased spectrum worth ~Rs 87,946 crores during the recently concluded spectrum auction. Post recent spectrum auction, RJIL’s total owned spectrum footprint has increased significantly to 26,768 MHz (uplink + downlink), which is the highest in India. Besides, the company also has access to an extensive network of telecom towers and optical fiber network in the country. This, along with the acquisition of spectrum in premium 700 MHz band in the recent auction would help the company to provide superior quality of services and enhanced coverage across circles, results in better operating efficiencies.
Thus, RJIL’s EBITDA improved ~28% year-on-year to Rs 11,046 crore in the quarter ended June 30, 2022. EBITDA margin improved by ~250 bps to ~50.5% during the quarter. On a consolidated basis, JPL’s EBITDA and EBITDA margin improved ~29% year-on-year to Rs 11,424 crore and ~180 bps to 48.7% respectively, in the quarter ended June 30, 2022.
Weakness:
The telecom industry also remains susceptible to technological changes. New technology in the telecom industry necessitates fresh investments or overhaul of existing networks. The advent of 4G, for instance, has seen operators investing substantially in upgrading infrastructure even before they had made significant gains on investments in 3G. Similarly, with the transition to 5G, players may again need to incur significant additional capex even after spending heavily for acquiring spectrum. Higher-than-expected investments having a bearing on financial risk profile will continue to be monitored. |
Liquidity: Superior JPL on a consolidated basis had strong liquidity of over Rs 6,000 crore as on August 31, 2022. Given the nature of its business, the working capital requirements are low. JPL also draws comfort from its parent, RIL, which has exceptional financial flexibility, owing to its demonstrated ability in accessing the capital markets, large cash and liquid investments, and significant unutilised bank lines. |
Rating Sensitivity factors Downward factors:
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About the Issuer JPL, incorporated in November 2019, is the parent entity of RJIL. RIL currently holds 66.43% stake in JPL. JPL has created an eco-system comprising network, devices, applications and content to provide seamless services. Apart from RJIL, JPL has investments in digital technology, including artificial intelligence, online education, and digital media and content, among others.
About RJIL RJIL is a wholly owned subsidiary of JPL. RIL holds 66.43% stake in JPL. RJIL has built an all-IP data network with the latest 4G LTE technology, which supports voice over LTE. The network can be upgraded to support even more data, as technologies advance to 5G and beyond. JPL has created an ecosystem comprising network, devices, applications and content to provide seamless services. The company also provide FTTH services (or JioFiber) with currently over 7 million connected premises.
About the parent, RIL RIL is one of India's largest private sector companies, with diverse interests, including petrochemicals, oil refining, and upstream oil and gas exploration and production. Oils-to-chemicals are RIL's largest business by revenue, which include oil refining and petrochemicals. In the recent past, consumer facing businesses, including retail and digital services, have become RIL’s principal growth drivers. Reliance Retail Ltd (CRISIL AAA/Stable/CRISIL A1+) is India’s largest retail entity by revenue, while RJIL is also India’s largest telecom service provider by subscriber as well as revenue market share. |
Key Financial Indicators: Jio Platforms Ltd (Standalone)
NM: Not meaningful
Key Financial Indicators: Reliance Jio Infocomm Ltd (Standalone)
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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