Abu Dhabi’s ADIA renews Indian interest with a deal for Jio Digital Fibre

By Rahul Vaimal, Associate Editor
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The Abu Dhabi Investment Authority (ADIA) has revived its initial discussions with India’s Reliance Industries Ltd (RIL) to inject approximately $1 billion into InvIT- Jio Digital Fibre, which is a subsidiary of RIL.

Infrastructure investment trusts, or InvITs, are instruments that work like mutual funds. InvITs are designed to pool small sums of money from a number of investors to invest in assets that give cash flow over a period of time. Part of this cash flow would be distributed as dividends back to investors.

Last month, ADIA had entered into a deal to infuse $752 million in Jio Platforms and the investment of the sovereign wealth fund would translate into a 1.16% stake in the digital unit of RIL.

ADIA has already received the first round of approvals from its executive committee and is likely to have a board meeting within the next few days to review the proposal. Even a final call on the matter may be expected as an outcome of the meeting.

In 2019, an ADIA -led group had shown interest in buying a majority stake in the Jio Digital Fibre InvIT. The group included I Squared Capital which is an infrastructure-focused fund and Singapore’s GIC. But the discussions were dropped as the involved parties failed to reach a consensus regarding the operating conditions and trade.

According to a study, unlike last year, ADIA — the world’s third-largest sovereign wealth fund — is actively pursuing the issue for a substantial 20-25% minority stake in the InvIT.

“The business case of Jio has changed and its digital plans based on three key pillars of commerce, content and carriage are already rolling out with subscribers coming on board. It’s easier to make an investment thesis now compared to six months before when it was still in an early rollout stage. This backbone would play a crucial role in the development of the 5G ecosystem in India”, said a source familiar with the matter.

As the world adapts to the “new normal”, demand for home broadband will spike as a huge number of people continue to work from home. ADIA recognizes the low market penetration in the Asian countries and is looking to tap into the opportunity. The market penetration of fixed-line broadband in India is a mere 20%.

Jio, the country’s largest telecommunications firm, has left no stone unturned to catch India ‘s massive broadband market that is expected to rise 2 to 5 times in the subscriber base.