Jio Fin arm plans Rs 36K cr deal with Reliance Retail

Mukesh Ambani’s Jio Financial Services (JFS) is set to seek shareholders’ approval for its leasing subsidiary to acquire telecom equipment and devices worth Rs 36,000 crore ($4.33 billion) from Reliance Retail.

Jio Leasing Services Limited (JLSL), a wholly-owned subsidiary of JFS, plans to enter the device leasing business, and the equipment will be deployed in broadband wireless connectivity and other services.

“JLSL is entering into the business of operating lease via a device-as-a-service (DaaS) model.

"DaaS is a new-age service model where businesses or individuals lease certain goods along with associated services, rather than purchasing the devices outright,” according to a postal ballot notice to shareholders by JFS.

DaaS typically includes installation, maintenance, support, and sometimes additional services like updates.

Reliance Retail is a step-down subsidiary of Reliance Industries Ltd. RIL holds 83.56 per cent in Reliance Retail Ventures Ltd, which has a 100 per cent stake in Reliance Retail.

Reliance Retail is in the business of dealing in devices and related equipment.

JLSL will purchase customer premises equipment/devices and telecom equipment from Reliance Retail, according to the postal ballot notice.

JLSL will provide devices and telecom equipment on operating lease to the customers of Reliance Jio Infocomm.

The deal will be at cost plus margin, and arrangements are proposed to be in the nature of continuing business transactions.

The monetary value of the transactions is estimated to be Rs 36,000 crore to be undertaken over FY25 and FY26.

The split of purchases across the two years would depend on the uptake of services and the pace of deployment of broadband wireless devices, according to the notice to shareholders.

The listed companies have to seek shareholders’ nod for related party transactions which in a financial year exceed Rs 1,000 crore and 10 per cent of the annual consolidated turnover.

The annual audited consolidated turnover of the company for FY23 was Rs 41.63 crore, and FY24 is Rs 1,853.88 crore.

Reliance Retail is in the business of dealing in customer premises equipment, enterprise devices, and other telecom devices.

It is able to procure these goods at competitive prices due to large volumes, and Reliance Retail will provide these devices to JLSL at cost plus an agreed margin, the notice said.

Jio Financial Services operates broadly in four categories — lending and leasing, payments, protection, and investments.

In the lending and leasing segment, it has started vendor financing and plans to enter home loans, loans against property, and loans against mutual funds.

In the leasing segment, under the DaaS model, it aims for a new-age service model for customer devices to target AirFiber, phones, laptops, solar panels, and electric vehicle batteries – among others, according to an investor presentation.