Reliance’s Ambani agrees latest Jio stake sale with $1.5bn Vista Equity deal

Mukesh Ambani has sold a stake in his Indian digital services group Reliance Jio for a third time in three weeks, agreeing to a $1.5bn deal with US buyout group Vista Equity Partners, people with direct knowledge of the matter said. 

The sale is the latest move by India’s richest man, who controls Reliance Industries, to alleviate the conglomerate’s heavy debt burden. Late last month, Mr Ambani agreed to sell a 10 per cent stake to Facebook for $5.7bn and earlier this week a $750m deal with Silver Lake Partners that valued Jio at $65bn. 

That is the same valuation at which Vista is set to acquire a 2.3 per cent stake in Jio Platforms, a subsidiary of Reliance, one person familiar with the terms of the deal told the FT.

The string of deals highlights the growing appeal of Jio to foreign investors looking to find a foothold in India’s fast-growing internet market, as it looks to consolidate its dominant position in telecoms and expand into a broader array of services. 

For Vista, a software-focused buyout firm, the acquisition is meant to open the Jio ecosystem to its array of portfolio companies that would try to expand the reach of their products and services in India. 

The negotiations were built off of personal connections made between Robert Smith, Vista’s founder, and Mr Ambani, one person said. The discussions were led by Brian Sheth, a co-founder of Vista who is half-Indian of the same Gujurati background as Mr Ambani, and Monti Saroya, a senior Vista executive who is also Indian-American, with Manoj Modi of Reliance.

Morgan Stanley, which also worked on the Facebook and Silver Lake deals, advised Reliance. 

Reliance, whose core businesses continue to be in oil refining and petrochemicals, launched Jio as a telecoms operator in 2016. The company has since attracted 388m users to its 4G network by offering cut-price mobile contracts, helping to fuel a boom in data consumption.

Jio has since expanded into home broadband, streaming and ecommerce, with a view to creating an Indian internet group whose position would rival that of Alibaba’s in China. Reliance has also built India’s largest bricks-and-mortar retail concern as part of its broader shift into consumer-facing businesses.

The partnership with Facebook in particular will afford Jio formidable reach, tying its ecommerce platform to Facebook’s messaging service WhatsApp, which has about 400m users in India. This will help it to compete against incumbents such as Amazon and Flipkart, owned by Walmart.

Reliance has courted international investors in order to help cut the sizeable debt burden it has taken on through its blistering expansion into telecoms and digital services. Mr Ambani has vowed to cut its net debt, which stood at more than $20bn in March, to zero within a year.

The tycoon separately announced last week a $7bn rights issue, India’s largest, as a part of a fundraising drive. A deal for Saudi Aramco to take a 20 per cent stake in Reliance’s oil-to-chemicals business is still pending, however. The drop in crude oil prices has strained the Saudi group’s earnings as well as Reliance’s own lucrative energy businesses.

The company has said it is in talks with investors to sell more of its newer digital and retail businesses, with a view to eventually listing them.

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