Reliance Retail purchases JioPhone, feature phone device, from OEMs and sells it to a third-party leasing entity at modest levels of EBITDA margins. JioPhone is then leased back by Reliance Retail from the third-party entity at a quarterly rental cost for a period of three years and provided to the customers subscribing for JioPhone services.
Reliance Retail had earlier indicated it plans to recover the rental cost over the life of a device through (1) margins (~2%) on related Jio recharges, (2) app-hosting charges on Kai-OS, which is the operating system used in JioPhone and owned by Reliance Retail, (3) revenues from advertisements on JioPhone and (4) other income on interest-free security deposit provided by the customer.
OPC Asset Solutions is the entity securitizing rent receivables from Reliance Retail for leasing of devices. It has raised Rs 120 bn in May-December 2018 from pass-through certificates (PTCs) under three trusts—(1) Rainbow Device Trust, Rs 15 bn @ 8.26% in May 2018, (2) Rent-A-Device Trust, Rs55 bn @ 9.25% in July 2018 and (3) Reliable Devices Trust, Rs50 bn @ 9.71% in December 2018. These PTCs are backed by over Rs130 bn of rent receivable against devices leased to Reliance Retail and the cumulative quarterly installment stands at Rs 11.5 bn now.
