Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL AAA/Stable/CRISIL A1+' ratings on the debt instruments of Reliance Jio Infocomm Ltd (RJIL) and withdrawn its rating on Rs 5,000 crores of NCDs (see ‘Annexure: Details of Rating Withdrawn’) given that these have been fully redeemed and on receipt of confirmation from the debenture trustee. This rating action is in line with the withdrawal policy of CRISIL Ratings.

 

The ratings continue to reflect the leading market position of RJIL in the telecommunication (telecom) sector in India along with strong operating performance and healthy financial risk profile aided by healthy debt protection metrics. The ratings also take into account the strategic importance of the company to Reliance Industries Ltd (RIL; ‘CRISIL AAA/Stable/CRISIL A1+’) group. These strengths are partially offset by exposure to regulatory and technological risks.

 

RJIL is a wholly owned subsidiary of Jio Platforms Ltd (JPL; CRISIL A1+), which holds the digital services businesses of the RIL group. The digital services segment is the group’s principal growth driver, alongside retail.

 

Operating performance of RJIL remained healthy and continued to improve sequentially. In fiscal 2024, revenue grew ~10% to Rs 100,119 crore while the earnings before interest, depreciation, taxes, depreciation and amortisation (Ebitda) margin expanded by 139 basis points. This was driven by improvement in subscriber addition and average revenue per user (ARPU); net subscriber addition was ~43 million subscribers while ARPUs rose to Rs 181.7 from Rs 178.8. Net subscriber declined in the second quarter of fiscal 2025 by 10.9 million  to 478.8 million, owing to tariff hikes undertaken in the month of July 2024, however maintains its market leadership position while ARPU increased to  Rs 195.1 per subscriber per month on a sequential basis. Thus, RJIL’s operating revenue is estimated at Rs 28,388 crore for the second quarter of fiscal 2025, higher by ~14.5% year on year, aided by subscriber additions and ARPU increase. The Ebitda margin was 53.7% in the second quarter of fiscal 2025, compared to 52.8% in the corresponding quarter of the previous fiscal. Rising data usage along with broad-based tariff hikes in July 2024 and adoption of 5G services should continue to drive ARPU in the near term, thereby boosting further growth in revenue as well as operating profit.

 

JPL’s consolidated net leverage, including deferred payment liabilities, stood at ~3.17 times as on March 31, 2024, as against ~3.32 times a year ago. Despite substantial spectrum liabilities, the financial risk profile remained healthy, aided by improving operating performance. Capital expenditure (capex) intensity is expected to moderate over the medium term as mass 5G networks have been established. Similarly, capex may also reduce as most of the purchase was completed in fiscal 2023. RJIL had acquired significant spectrum for a total consideration of Rs 87,947 crore in the spectrum auction held in August 2022 to initiate pan-India 5G rollout. Compared with that, in the latest auction in June 2024, RJIL acquired Rs 974 crore worth of spectrum. With strong cash accrual projected over the medium term, cash flow is expected to be utilised for deleveraging. Higher-than-expected investments on network and spectrum will remain monitorable.

 

RJIL also has offtake arrangements with special purpose vehicles including Jio Digital Fibre Pvt Ltd (‘CRISIL AAA/Stable/CRISIL A1+’) and Summit Digitel Infrastructure Pvt Ltd (‘CRISIL AAA/Stable’) for use of optical fibre and telecom tower infrastructure, respectively. Access to strong backhaul and national backbone network through these offtake arrangements 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 RJIL with its parent entity, JPL, owing to the latter’s 100% ownership in the company, along with common management and operations. CRISIL Ratings has also applied its parent notch-up framework to factor in the intensity of support available to JPL and RJIL from RIL. The support is expected to continue given their strategic importance to, and strong linkages with, RIL. Deferred payment liabilities to the telecom department towards the 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:

• Sustained market share leadership

RJIL has a healthy subscriber base and revenue market share with pan-India network. As per the Telecom Regulatory Authority of India, the company had a wireless subscriber base of ~47.88 crore as on September 30, 2024 (market share of ~40.2%). Revenue market share (including national and international long distance) stood strong at ~40.0% for the quarter ended September 2024.

 

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

 

• Strong operating performance

RJIL’s operating performance remained strong and continues to improve. The parameters for driving operating performance of the company have demonstrated healthy growth over the past fiscals. ARPU increased at a compound annual growth rate (CAGR) of ~9% over fiscals 2020-2024 from Rs 130.6 to Rs 181.7 while wireless subscriber base has rose to ~48.2 crore at a CAGR of ~6% over the same period. Besides, data usage per subscriber per month has risen to 28.7 gigabytes, reporting a CAGR of ~26% over fiscals 2020-2024. Fibre-to-the-home (FTTH) services also continued to witness improving uptake on the back of affordable and bundled offerings.

 

• Healthy financial risk profile, aided by strong debt protection metrics

Overall gross debt of JPL stood at Rs 1,78,197 crore for the year ended March 31, 2024, of which 63% were for deferred spectrum liabilities, 7% were in the form of lease liabilities and only balance (30%) was external debt. JPL’s consolidated net leverage, including deferred payment liabilities, stood at ~3.17 times as on March 31, 2024, as against ~3.32 times a year ago. Despite substantial spectrum liabilities, the financial risk profile remained healthy, aided by improving operating performance. With strong cash accrual expected, going forward, the cash flow is expected to be utilised for deleveraging. Higher-than-expected investments on network and spectrum will remain monitorable.

 

• Strategic importance to RIL and strong management and financial support

JPL, including RJIL, is a strategically important part of the RIL group, given the parent's substantial investments in the company and its focus on setting up large digital services business. RIL's majority stake, active involvement of its management and the shared identity of the name, Reliance, also support the rating. RIL and JPL have a common chairperson.

 

Weakness:

• Exposure to regulatory and technological risks

Regulatory and policy changes have played a central role in defining the risk characteristics of the Indian telecom sector, which is structurally dynamic. The telecom industry also remains susceptible to technological changes, with capex cycles every 8-10 years. New technology in the telecom industry necessitates fresh investments or overhaul of existing networks. For instance, with the launch of 5G services, players were required to significantly invest in laying networks even after incurring significant capex for 4G networks just few years preceding that.

Liquidity: Superior

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

Outlook: Stable

The strong market position and healthy operating efficiency will continue to support the credit risk profile of RJIL. Moreover, the company remains strategically important to RIL.

Rating sensitivity factors

Downward factors

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

About the Issuer

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 long-term evolution (LTE) technology, which supports voice over LTE. The network can be upgraded to support even more 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 provides FTTH services (or JioFiber).

About JPL

JPL, incorporated in November 2019, is the parent entity of RJIL. RIL currently holds 66.43% stake in JPL. JPL has created an ecosystem 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. 

 

About 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 are RIL's largest business by revenue, which include oil refining and petrochemicals. In the recent past, consumer-facing businesses, including retail and digital services, have become RIL’s principal growth drivers. Reliance Retail Ltd (‘CRISIL AAA/Stable/CRISIL A1+’) is India’s largest retail entity by revenue, while RJIL is also India’s largest telecom service provider by subscriber as well as revenue market share.

Key Financial Indicators (Standalone)

Particulars	Unit	2024	2023
Revenue	Rs crore	1,00,119	90,786
Profit after tax (PAT)	Rs crore	20,466	18,207
PAT margin	%	20.4	20.0
Interest coverage	Times	13.1	11.5
Adjusted debt/Ebitda	Times	3.1	3.1

 

Any other information: Not applicable

Annexure – List of entities consolidated

Names of Entities Consolidated	Extent of Consolidation	Rationale for Consolidation
Jio Platforms Ltd	Fully consolidated	Parent entity of RJIL with 100% ownership and common management and operations