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Jio Silver Lake Deal: Another Masterstroke of Mr. Ambani?

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After announcing deal with Facebook, Reliance Industries Limited (RIL) announced its latest deal with Silver Lake on 4th May.

 
 
 
 
 
In current Indian Telecomm wing, Jio is emerging as a sector leader pacing down the decade old network providers like Airtel and Vodafone. But, after RIL’s announcement to go debt free, there were many speculations going on in the market regarding how the company achieve the desired status. Amid all that, on 22nd of April, RIL came up with the Jio-Facebook deal and later 4th of May, much to everyone’s surprise, they came up with Jio-Silver Lake deal. So, will the Silver Lake’s deal bring silver lining to Jio’s fortunes? Will it prove a masterstroke for the company? Will RIL be able to achieve zero debt status? So, let’s gain some knowledge of Jio-Silver Lake deal.

 


Some facts about SilverLake

The firm started its operations in the year 1999 as a specialist firm focused on technology company investments. According to Moneycontrol, its portfolio generates over $204 billion annually.

The portfolio includes:

  • Twitter
  • Airbnb
  • Alibaba Group
  • Ant Financial
  • Didi Chuxing
  • Motorola Solutions
  • City Football Group

 
Instances when SilverLake came to limelight:

  • In late 2018 when Dalian Wanda Group of China announced to sell 28% stake of AMC Entertainment to Silver Lake.
  • In the year 2013 when they acquired Dell Inc along with Michael Dell.
  • In the year 2011 when they sold Skype to Microsoft for $8.5 billion.

 
Silver Lake made its first investment in India back in year 2013 when it purchased the minority stake in Bangalore based IT firm Ekta Software.

 

Insights of deal of Jio-Silver Lake

On 4th May, 2020, the news was confirmed that Silver Lake Partners an American private equity firm has bought stake in Jio Platforms.Following are vital insights of the deal:

  • Silver Lake bought a stake of around Rs. 5,655.75(Moneycontrol) crore in Jio Platforms.
  • The deal values Jio at $65.95(Rs.5.15 lakh crore) billion at a 12.5% premium to the value indicated by Facebook.
  • The stake for Silver Lake will stand at 1.15% in Jio Platforms.
  • Silver Lake will not get status of member of board.
  • There is announcement of any technological transfers or business know-how sharing as a part of deal.
  • The deal will purely work as a tool investment in form of stake in Jio Platforms.

 

Brief comparison of Jio-Silver Lake and Jio-Facebook Deal

Deal Particulars Jio-Silver Lake Jio-Facebook
Deal Value Rs. 5655.75 crore Rs.43754 crore
Stake Purchased 1.15% 9.99%
Valuation of Jio Rs.4.62 lakh crore Rs.5.5 lakh crore
Status of board member in Jio post deal closure No Yes
Technology sharing No Yes

 


Benefits of Deal to Jio

  • Jio Platforms will receive an additional cash inflow of around Rs.5500 crores which they can use to pay off debts.
  • Post closure of the deal, Silver Lake will not receive status of board member hence Jio can work independently.
  • As the deal has valued Jio at 12.5% premium then previous deal, the market valuation of Jio will improve.
  • Jio is will emerge more strongly as contender for more IT FDI investments for future.

 
So, now we can get an on-paper idea of how this deal will work. The practical circumstances are always going to prove to be different and more unexpected. Currently the Telecom sector of India is facing the slump of its lifetime and Jio is one of the emerging entities amid all the slumps and the drawbacks. The overall Indian and world economy is currently at slump due to Covid-19 factors and it’s a positive point for RIL and Jio that they can attract such huge investment deals. Its now totally unpredictable what will be RIL’s and Jio’s next move to gain the status of ‘Zero Debt Company’. It lies within time and speculations that- Will this masterstroke of Mr. Ambani Prove as Silver Lining for Jio?

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