Facebook founder Mark Zuckerberg has purchased 9.9% of share in Reliance Jio Platforms Ltd for Rs.43,574 crore equivalent to USD 5.7 billion that means USD 5,700 crore only.
My observations are as follows:
- As 9.9% of shares were allotted for Rs.43,574 crore in Jio Platforms Ltd, the total value of the company works out to Rs.4.62 lakh crores.
- Jio Platforms Ltd is a Wholly Owned Subsidiary (WOS) of RIL. Hence Jio Platforms Ltd (JPL) is not a listed company.
- As of 31-3-2019 audited balance sheet, RIL includes Reliance Retail business, Jio mobile business and petrochemical business also. So it was a combined balance sheet of all the businesses. The paid-up share capital was Rs.6,339 crore. Reserves (profits retained after payment of dividend) were Rs.398,981 crore. So, net worth of the company was Rs.405,322 crores.
- As per statistics for RIL net worth is Rs.405,322 crore, includes all three major businesses of telecom, petrochemical and retail. Hence valuing Jio at Rs.4.62 lakh crore is a big value or known as Brand Value of Jio Platforms Ltd.
- As per information disclosed to BSE and SEBI as at 31-12-2019 the total debt of RIL was Rs.306,857 crore. Due to this huge loan, the RIL share touched a peak of Rs. 1617 only in January 2020. Had the debt was little over Rs.2.0 lakh crore the RIL share would have been Rs.3000/- by this time. The net profit of the company for 2018-19 was Rs.35,163 crore and depreciation provided was Rs.10,558 crore. So put together the cash profit available with the company was Rs.45,721 crore. That means If the same profits earned in the next seven years all the debt can be cleared in 2027.
- Jio Platforms Ltd was started for the Digital revolution initiative only. RIL invested in the Equity capital of Rs.4961 crore and another Rs.165,000 crore as Optionally Convertible Preference Shares (including huge premium). As per information available, JPL has acquired investment of Rs.64,450 crore in Reliance Jio Infocomm Ltd also.
- As informed to SEBI and BSE the 25-year lease of Punna – Mukta Oil and gas fields were completed in December 2019 and as per agreement these gas fields handed over to ONGC. So RIL has depended only on Kakinada Gas field or import from ARAMCO in Opec area.
- So the main question is when Jio will be Demerged from RIL as an independent company and how much loan will be transformed to Jio? Practically very very small loan was there in 2014 for RIL, but later due to starting of Reliance Retail and Jio huge loans were taken from Banks and public persons also. Then what about Reliance Retail in which also huge money was invested by RIL. As per audited balance sheet investments were Rs.331,536 crore as at 31-3-2019 ( Rs.225,222 crore on 31-3-2018).
- Profit booking is an art, we have seen Mr Srini Raju the co-founder and Satyam computers has sold his shares fully in 2002-03 and started TV9 network. Whereas Mr Ramalinga Raju held the shares till last day, though pledged some, not got any money. Now TV9 shares were also sold at a good rate.
- If we observe company law, 9.99% stake in shares is the minority holding only. So Mr Jukerberg can not become a director now.
- In future if he spends Rs.450 crore he gets another 0.1% share , thus becomes 10% share holder and eligibility for director post will come.He can purchase it through other companies or friends in the open market.
- Mr Jukerberg got shares at a 30% discount as share market has collapsed since March 2020. So his benefit is around Rs.14,000 crore.
- Moreover, it is an exclusive investment so he can purchase shares in competing companies of RIL also, say Amazon or Flipkart or Zomato also.
- All assumptions depend on the success of Reliance Retail entering in a big way to sell all consumables and retail goods like Amazon, Flipkart, Demart, Big Bazar etc. Last but not least Zomato may give tuff competition to all from August 2020.
- Amazon and Flipcart invested huge amounts in Indian market but not posted profits till now. What about Jio Platforms Ltd? When it posts profits in the retail business? If the Demerger of the company does not happen immediately, RIL profits also will nosedive due to huge depreciation in the first three years.
- As per balance sheet as at 31-3-2019 the net fixed assets were Rs.203,188 crore and work in progress was Rs.111,557 crore, that means a huge investment of Rs2.0 lakh crore was expected for Retail Business for Jio Platforms. But only one observation was the net worth of Rs.405,322 crore and secured loans Rs.15,231 crore and unsecured loans of Rs.146,489 crore was invested in the business. That means Rs.567,042 crore created fixed assets of Rs.314,745 crore fixed assets (after depreciation). This is one reason for the biggest company like RIL to quote at Rs.1300 per share.
More American companies may invest directly under FDI in Pharma sector also as shares are listed at low at the bourses. Otherwise, they may invest in unlisted companies like Facebook. So at least two lakh crore rupees may be invested in FDI route in Indian companies if this trend continues. India is a safe haven for investment with democracy.
Reliance Industries Ltd may sell another 20% stake to ARAMCO company for Rs.1,20,000 crore maybe after five or six months and reduce the interest burden and instalment burden also.
Let us wish Jio Platforms Ltd a grand success in coming days.