Jio Platforms, one of India’s largest telecom companies, has taken a big step towards its much-awaited IPO. The company has filed draft documents for the IPO. According to the document, Jio will use a major part of the funds raised from the IPO to repay the foreign debt of its telecom unit. This will reduce the debt burden of the company and will give impetus to its future development plans.
275 billion rupees will be spent in repaying the loan
According to the Draft Red Herring Prospectus (DRHP), Jio Platforms will use Rs 275 billion (about $ 2.9 billion) of the IPO proceeds to repay existing debt. Although the company has not yet disclosed the total size of the IPO, but it has been made clear in the document that reducing debt is one of the main priorities of the company.
Jio can issue up to 27 crore new shares through this IPO. It is believed that this could be one of the biggest IPOs in India.
Loan taken from foreign banks
Jio’s telecom unit Reliance Jio Infocomm Limited has three big loans under External Commercial Borrowing (ECB). Their total amount is Rs 300.6 billion. This loan has been taken in dollars and Japanese yen.
Major lenders of these loans include international banks like Australia and New Zealand Banking Group (ANZ), Bank of America, Barclays, BNP Paribas and Citibank. The company has said that these loans will be fully or partially repaid through the funds received from the IPO.
Financial strength will increase by reducing debt
The company says that premature repayment of the loan will strengthen its balance sheet. There will also be a reduction in interest payments and other financial expenses. This will reduce the net debt of the company and it will be easier to raise capital if needed in future.
Experts believe that companies with less debt get more confidence from investors, which strengthens their market position.
Focus will be on 5G, broadband and AI
Jio Platforms has said that after reducing the debt, the company will be able to invest more on its strategic projects. Among these, expansion of 5G network, increasing the reach of fixed broadband services, development of Artificial Intelligence (AI) and cloud services are prominent.
According to market experts, this strategy of reducing debt through IPO will put Jio in a better position for future technological competition. This is expected to give new momentum to the company’s business and investors can also get long-term benefits.
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