Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL A1+' rating on the commercial paper programme of Jio Platforms Ltd (JPL).

 

JPL is the parent entity of Reliance Jio Infocomm Ltd (RJIL; 'CRISIL AAA/Stable/CRISIL A1+'), and holds the digital services business of the RIL group. Digital services and retail are the key growth engines for the group. Apart from RJIL, JPL has investments in digital technology, including artificial intelligence, online education, digital media and content, among others. 

 

The reaffirmation reflects the leading market position of RJIL in the telecom sector in India, its strong operating performance and healthy financial risk profile. The ratings also factor in the strategic importance of the company to Reliance Industries Ltd (RIL; ‘CRISIL AAA/Stable/CRISIL A1+’). These strengths are partially offset by exposure to regulatory as well as technological risks.

 

Operating performance of RJIL was has improved sequentially. Operating revenue has grown by nearly 10% to Rs 100,119 crore in fiscal 2024, while the operating margin has expanded by 139 basis points. This was driven by net addition of around 43 million subscribers and increase in average revenue per user, from Rs 178.8 to Rs 181.7.  The company has further added around 8 million subscribers in the first quarter of fiscal 2025, driven by customer retention and net port-ins, while ARPU remained flat at Rs 181.7 per subscriber per month on a sequential basis.

 

Operating revenue of RJIL was 26,478 crore in the first quarter of fiscal 2025, higher by nearly 10% year-on-year, driven by consistent subscriber additions and increase in ARPU. Earnings before interest, tax, depreciation and amortisation (EBITDA) margin was 53.0%, compared to 52.7% in the first quarter of fiscal 2024. Rising data usage, along with broad-based tariff hikes taken in July 2024, and adoption of 5G services should continue to drive ARPU in the near term, and thus aid growth in revenue and operating margin.

 

Consolidated gross revenue of JPL grew 12.8% year-on-year to Rs 34,548 crore in the first quarter of fiscal 2025, driven by the strong performance of RJIL. Moreover, the company has maintained a healthy EBITDA margin of 49.7% during the quarter.

 

JPL’s consolidated net leverage, including deferred payment liabilities, was around 3.17 times as on March 31, 2024, as against around 3.32 times as on March 31, 2023. Despite substantial spectrum liabilities, the financial risk profile remained healthy, aided by improving operating performance. Capex intensity could moderate over the medium term, as mass 5G networks have been set up. Similarly, spectrum capex is also likely to reduce as most of the spectrum purchase was completed in fiscal 2023. RJIL had acquired significant spectrum for a total consideration of Rs 87,947 crore in the auction held in August 2022, to initiate the pan-India 5G rollout. As against that, RJIL acquired Rs 974 crore worth of spectrum in the latest auction in June 2024. With strong cash accrual expected going forward, cash flow is expected to be utilised for deleveraging. Higher-than-expected investment on network and spectrum will remain key monitorable.

 

RJIL also has offtake arrangements with special-purpose vehicles (SPVs), including Jio Digital Fibre Pvt Ltd (JDFPL; ‘CRISIL AAA/Stable/CRISIL A1+’) and Summit Digitel Infrastructure Pvt Ltd (SDIPL; ‘CRISIL AAA/Stable’) for use of optical fibre and telecom tower infrastructure, respectively. This provides RJIL significant competitive advantage, given the growing data consumption in India.

Analytical Approach

CRISIL Ratings has consolidated the business and financial risk profiles of JPL with its subsidiary, RJIL, considering the 100% ownership, common management and operations. CRISIL Ratings has also applied its parent notch-up framework to factor in the intensity of support available to JPL from RIL. The support should continue, given the strategic importance of JPL to RIL, and strong linkages between the entities. Deferred payment liabilities of RJIL to the Department of Telecommunication (DoT) towards acquisition of spectrum, have been considered as debt. 

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Sustenance of market share and leadership position: RJIL has a healthy subscriber base and revenue market share with a pan-India network. As per Telecom Regulatory Authority of India, the company had around 47.7 crore wireless subscribers as on March 31, 2024 (market share of around 40.7%). Revenue market share (including national and international long distance) was strong at around 38.3% for the quarter ended March 31, 2024.

 

RJIL purchased spectrum worth around Rs 974 crore during the auction held in June 2024. Post auction, RJIL's total owned spectrum footprint has increased significantly to 26,797 MHz (uplink + downlink), which is the highest in India. Besides, the company also has access to an extensive network of telecom towers and optical fiber network across the country. This, along with acquisition of spectrum in premium 700 MHz band in the auction held in August 2022, would help the company provide superior quality services and enhanced coverage across circles and thus, enhance operating efficiency.

 

• Strong operating performance: Operating performance of RJIL continues to improve, driven by healthy growth in all key parameters over the past few fiscals. ARPU has recorded a compounded annual growth rate (CAGR) of around 9% over fiscals 2020-2024, from Rs 130.6 to Rs 181.7, while the wireless subscriber base has reached around 48.2 crore, at a CAGR of around 6% over the same period. Besides, data usage per subscriber per month has grown to 28.7 GBs at a CAGR of around 26% over fiscals 2020-2024. Fibre-to-the-home (FTTH) services also witnessed better offtake, led by affordable and bundled offerings.

 

• Healthy financial risk profile, aided by strong debt protection metrics: Gross debt of JPL stood at Rs 1,78,197 crore for the year ended March 31, 2024. Deferred spectrum liabilities formed 63%, followed by lease liabilities (7%) and external debt constituted the balance 30%. Consolidated net leverage of JPL, including deferred payment liabilities, was around 3.17 times as on March 31, 2024, as against around 3.32 times as on March 31, 2023. Despite substantial spectrum liabilities, the financial risk profile has been healthy, aided by better operating performance. With strong cash accrual, cash flow is expected to be utilised for deleveraging. Higher-than-expected investments on network and spectrum are monitorables.

 

• Strategic importance to RIL, and strong management and financial support: JPL, including RJIL, remains strategically important to the RIL group, given substantial investment made by the parent and its focus on setting up a large digital services business across the country. The majority stake held by RIL, active involvement of its management, and the shared identity of Reliance, also support the rating. RIL and JPL have a common chairperson.

 

Weakness:

• Exposure to regulatory and technological risk: Regulatory and policy changes have played a central role in defining risk characteristics of the Indian telecom sector, which is structurally dynamic. The telecom industry also remains susceptible to technological changes, with capex cycles taking place every 8-10 years. New technology necessitates fresh investments or an overhaul of the existing networks. For instance, with the launch of 5G services, players had to make significant investment in laying networks, even after incurring sizeable capex for 4G networks, few years ago.

Liquidity: Superior

RJIL, along with JPL, had liquidity of over Rs 8,000 crore as on July 31, 2024. Given the nature of business, working capital requirement is low.  The entities also derive comfort from the parent, RIL, which has exceptional financial flexibility, given its demonstrated ability to access capital markets, its large cash and liquid investments, and significant unutilised bank lines.

Rating sensitivity factors

Downward factors:

• Any change in credit profile of RIL or reduction in its ownership in JPL to less than 51%
• Significantly lower-than-expected returns from investments 

About the RJIL

RJIL is a wholly owned subsidiary of JPL. RIL holds 66.43% stake in JPL. RJIL has built an all-IP data network with the latest 4G LTE technology, which supports voice over LTE. The network can be upgraded to support additional data, as technologies advance to 5G and beyond. JPL has created an ecosystem comprising network, devices, applications and content to provide seamless services. The company also provide FTTH services (or JioFiber).

 

About the parent, RIL

RIL is one of India's largest private sector companies, with diverse interests, including petrochemicals, oil refining, and upstream oil and gas exploration and production. Oils-to-chemicals is the largest business by revenue, which includes oil refining and petrochemicals. In the recent past, consumer-facing businesses, including retail and digital services, have become principal growth drivers for RIL. Reliance Retail Ltd (‘CRISIL AAA/Stable/CRISIL A1+’) is India’s largest retail entity by revenue, while RJIL is the largest telecom service provider by subscriber as well as revenue market share in the country.

About the issuer

JPL, incorporated in November 2019, is the parent entity of RJIL. RIL currently holds 66.43% stake in JPL. The company has created an eco-system, comprising network, devices, applications and content to provide seamless services. Apart from RJIL, JPL has investments in digital technology, including artificial intelligence, online education, and digital media and content, among others. 

Key Financial Indicators: Jio Platforms Ltd (standalone)

Particulars	Unit	2024	2023
Revenue	Rs crore	7571	2557
Profit after tax (PAT)	Rs crore	138	283
PAT margin	%	1.8	11.1
Interest coverage	Times	NM	NM
Adjusted debt/EBITDA	Times	NM	NM

NM: Not meaningful as the company has no borrowings

Any other information: Not Applicable