| Jio Platforms Limited | ||
| 'CRISIL A1+' assigned to CP | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to annexure for Details of Instruments & Bank Facilities |
| Detailed Rationale |
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CRISIL has assigned its 'CRISIL A1+' rating to the commercial paper of Jio Platforms Limited (JPL). JPL is the parent entity of Reliance Jio Infocomm Limited (RJIL; 'CRISIL A1+'), and holds the digital services businesses 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 & content, among others. In fiscal 2021, RIL has divested a 33.52% stake in JPL to various investors, for a combined consideration Rs. 1.52 lakh crore. This includes investments by marquee investors such as Facebook, Silver Lake, Abu Dhabi Investment Authority, Mubadala, and also proposed investments by Google Inc, Intel and Qualcomm wherein the transactions are yet to be completed and are subject to regulatory and customary approvals. About Rs. 22,981 crore shall be retained at JPL, while the balance will mainly be up-streamed to RIL via repayment of optionally convertible preference shares (OCPS). JPL has entered into commercial partnerships with both Facebook and Google; to extend Whatsapp to RRL's 'new-commerce' business platform with Facebook, and to jointly develop an entry level affordable smartphone with Google. JPL's ratings factor in RJIL's leadership position in terms of subscriber and revenue market share in the Indian telecom industry, and strong traction in customer acquisitions. These strengths are partially offset by RJIL's exposure to a competitive telecom industry and regulatory risks in this space. In FY20, RIL infused Rs. 1.05 lakh crore in JPL, which was infused in RJIL to enable it to reduce external liabilities. This transaction significantly improved RJIL's financial risk profile, although this transaction was neutral for RIL on a consolidated level. RJIL has off-take arrangements with special purpose vehicles (SPVs), viz Jio Digital Fibre Pvt Ltd (JDFPL; 'CRISIL AAA/Stable') and Reliance Jio Infratel Pvt Ltd (RJIPL; 'CRISIL AAA/Stable') for use of optical fibre and telecom tower infrastructure, respectively. These SPVs were created by transfer of assets, along with a portion of liabilities, by RJIL, and are held by separate Trusts. The transfer of assets enabled RJIL to monetize these assets and reduce a part of its liabilities, while also moderating its capital expenditure (capex) requirements. Access to a strong backhaul and national backbone network through these offtake arrangements provides RJIL significant competitive advantage, given the growing data consumption and increasing smartphone penetration in India. RJIL has also rolled out its fiber-to-the-home (FTTH) undertaking, which will eventually be provided in 1600 cities. |
| Analytical Approach |
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CRISIL has consolidated the business & financial risk profile of JPL with its subsidiary, RJIL, owing to the former's 100% ownership in the company, along with common management and operations. |
| Key Rating Drivers & Detailed Description |
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Strengths * Large fiber and spectrum footprint of RJIL RJIL, the subsidiary of JPL, has a large, liberalized spectrum holding of 1,108 megahertz (MHz), which can be used for rolling out any technology without regulatory restriction. CRISIL believes that RJIL is uniquely placed with respect to offering LTE telecom services as it has pan-India liberalized spectrum across different bands (800 MHz, 1800 MHz and 2300 MHz), including sub-GHz LTE band. The company also has access to an extensive network of telecom towers and optical fiber network in the country. This, along with absence of any legacy technology results in better operating efficiencies. * RJIL's revenue market share leadership and strong traction in customer acquisition Since Q1 fiscal 2020, RJIL has the leading telecom services revenue market share in India, reflecting its strong position in the mobile broadband space in which it had a market share of 57% as on March 31, 2020. In the near-to-medium term, given the management's focus, rapid customer acquisition is expected to continue. This is reflected in the continued addition of subscribers, with net addition of 9.9 million in Q1 fiscal 2021 despite the impact of the Covid-19 outbreak, which brought the total subscriber base of RJIL to 398.3 million. RJIL's market position is also supported by its digital ecosystem comprising various applications and digital content besides voice and data services. * Strategic importance to RIL, and strong management and financial support JPL, including RJIL, is a strategically important part of the RIL group, given the parent's substantial investments in the company, and its focus on setting up a large digital services business. RIL's majority stake, active involvement of its management, and the shared identity of the name, Reliance, also support the rating. The Chairman of RIL is also the chairman of RJIL. Weaknesses * Regulatory risks in the telecom space Regulatory and policy changes have played a central role in defining the risk characteristics of the Indian telecom industry. The sector is extremely dynamic structurally and technologically; thus the risks pertaining to continued regulatory intervention are likely to persist. CRISIL continues to monitor the regulatory developments in the sector. * Exposure to a competitive industry The telecom industry in India is intensely competitive, marked by low tariffs and average revenue per user (ARPU), although this key metric is on an improving trajectory. The industry has well-entrenched players such as Bharti Airtel Ltd ('CRISIL AA/Stable/CRISIL A1+'), from whom RJIL continues to face competitive pressure. Moreover, JPL, including RJIL, is yet to realize the full potential of its investments, which partially constrains its return metrics currently. |
| Liquidity Superior |
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JPL, along with RJIL, has strong liquidity, reflected in cash and cash equivalents of Rs. 8,904 crore as on March 31, 2020. Moreover, JPL, at a consolidated level, does not have any long term debt on its balance sheet. Given the nature of its business, JPL's working capital requirements are low. JPL also draws support 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 unutilized bank lines. |
| Rating Sensitivity factors |
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Downward Factors * Any change in CRISIL's outlook on RIL, or reduction in its ownership in JPL to below 51% * Significantly lower-than-expected returns from investments. About the Issuer JPL, incorporated in November 2019, is the parent entity of RJIL. RIL currently holds a 74.75% stake in JPL, which will be 66.48% post completion of investments by Google, Qualcomm and Intel. 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 & content, among others. 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 India's largest telecom service provider by revenue market share. |
| Key Financial Indicators - RJIL | ||||||||||||||||||||||||
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| Key Financial Indicators - JPL | ||||||||||||||||||||||||
JPL was incorporated on 15th November, 2019 thus financials for fiscal 2019 are not applicable |
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL 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. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels. |
| 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. | |||||||||||||||||||||||||||||||||||||||
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