Reliance- TPG Deal

US-based TPG Capital is in active discussions with Jio Platforms as investors seek to buy into Mukesh Ambani’s telecom-technology-commerce triple play, said people in the know. If a deal happens, TPG would join bulge-bracket American private equity peers KKR, Silver Lake and General Atlantic in picking up a stake in the Reliance Industries unit.

TPG is an investor in several top global technology disruptors such as Uber, AirBnB and SurveyMonkey. The PE fund, known primarily for leveraged buyouts, has been in talks for the past few weeks and is expected to be nearing a deal that might see it invest $1-1.2 billion, similar to the previous rounds in Jio Platforms, said the people mentioned earlier. One of them said the investment could be as high as $1.5 billion. A formal announcement is expected in the next few days.TPG declined to comment. Mails to Jio did not generate any response till press time Wednesday. 

Jio Platforms has already raised INR 97,885.65 crore (nearly $13 billion) by diluting a 21% stake through eight transactions in seven weeks to a host of strategic and financial investors, starting with Facebook. With 388 million subscribers, the telecom business has become Reliance Industries’ growth engine, helping — along with the group’s fast-growing retail business — to offset the decline in oil and petrochemicals, the legacy cash cows.

Besides Facebook and buyout funds such as KKR, middle-eastern sovereign funds like Mubadala and Abu Dhabi Investment Authority (ADIA) have joined the Jio Platforms fund-raising juggernaut. With the latest investment from ADIA, which was announced last Friday, Jio Platforms is being valued at <Rupee>4.91 lakh crore, excluding debt and liabilities. Saudi Arabia’s Public Investment Fund (PIF) is also engaged with Jio Platforms for a $1.5-billion investment and is expected to  finalise negotiations in 7-10 days.

Other than new-age tech and internet unicorns, the Texas-headquartered buyout fund has backed or bought several pure-play technology businesses such as McAfee, First Data, Freescale Semiconductor, Avaya, Box and WindRiver.

Reliance Industries may Sell 9% More in Jio Platforms In 2019, TPG garnered $1.6 billion for its TPG Tech Adjacencies, a new investment vehicle focused on capital solutions for the technology industry. In February this year, its seventh Asia fund — TPG Capital Asia VII — raised $4.6 billion.

In India, TPG has deployed over $2 billion since setting up shop in the early 2000s across sectors such as financial services, retail, healthcare and pharma.

“In the past 5-6 weeks, the TPG conversation has intensified. Like most funds, it is also looking at new opportunities during the pandemic,” said an official involved in the negotiations who did not wish to be identified as the discussions are in the private domain.

In April, TPG did its first deal during the pandemic, buying a majority stake in LifeStance Health Inc, a provider of lower-cost health services.

In a recent interview to Bloomberg, TPG’s co-CEO Jon Winkelried said he is scouting for more deals in education and broadband communications — two industries where Winkelried sees winners emerging from the dislocations and demands created by social distancing and working remotely.

Attracting Investors In that context, Jio Platforms appears to fit the bill. RIL’s platform approach to create a digital ecosystem has attracted the attention of investors. Having already diluted over 20%, RIL watchers feel Ambani could shed another 9% before he lists the company, which could happen at a $100-billion valuation.  The fund-raising spree across subsidiaries, ahead of the planned IPO for Jio, along with an ongoing mega rights issue and slowing down of new investments, is also expected to deleverage Reliance Group’s balance sheet after an estimated $40 billion of capex to build the world’s largest 4G network.

“RIL has successfully managed to position itself as a zero-debt tech company in an environment of the virtual economy taking precedence over real. This has the added advantage of taking attention away from a weaker near-term refining outlook,” said Jal Irani of Edelweiss.