Reliance Jio's market listing likely in 2025 at $112B valuation
What's the story
International investment banking firm Jefferies, predicts that the initial public offering (IPO) of Reliance Jio could occur in 2025, potentially valuing the company at $112 billion. This forecast follows recent telecom tariff hikes led by Jio. "Jio leading the way in the recent tariff hikes unlike in the past while keeping feature phone tariffs unchanged shows focus on monetization and subscriber market share gains," said Bhaskar Chakraborty of Jefferies.
Options
Ambanis contemplate IPO or spin-off for Jio listing
To list Jio on Dalal Street, Reliance has two options - an IPO or a spin-off such as Jio Financial Services (JFS). Institutional investors like the spin-off route as holding company discounts won't apply to the listed entity. However, an IPO would allow Reliance Industries Limited (RIL) to maintain majority control over Jio after listing. "Their primary concern is the holdco discount of 20-50% in India but steeper (50-70%) for conglomerates in Korea and Taiwan," Jefferies stated in a report.
Benefits
Spin-off could benefit RIL shareholders
If RIL goes for a spin-off and lists Jio via the stock exchanges' price discovery process, Reliance shareholders would bag their proportionate shareholding in Jio, adjusted for RIL's 66.3% stake in it. "This would avoid the holdco discount and enable better value unlocking benefiting RIL shareholders. The owner's stake in Jio would fall to 33.3% on the listing," Chakraborty explained. This decision could be influenced by the strong performance of RIL and JFS stock prices since their listing.
Impact
Jio IPO could boost RIL share price
The potential IPO of Reliance Jio could add a 7-15% upside to the RIL share price, according to Jefferies. This projection is based on the strong performance of RIL and JFS stock prices since their listing events, coupled with the less-than-majority share of the owners in JFS. These factors may influence the step to adopt the spin-off route.