Reliance Jio is reportedly set to debut its initial public offering (IPO) in 2025 with the valuation of $112 billion, while the potential valuation of the IPO could be Rs 9.3 trillion, increasing the share price of Reliance Industries by 7-15% as per the brokerage firm company Jefferies.
The recent hike in tariffs was led by Jio while keeping the feature phone tariffs unchanged, indicating that the company aims to gain subscriber market share.
Jefferies speculated that the upcoming IPO would potentially have an offer for sale by minority shareholders. The firm further reported that 35% of the IPO could be reserved for the retail segment which would require a large mobilization of retail investors. “Their primary concern is the holdco discount of 20-50% in India but 50-70% for conglomerates in Korea and Taiwan. The large retail investor mobilization in the case of an IPO is another concern. The lower controlling stake in Jio on spin-off could be addressed by buying a part of the shares offered by private equity funds after the spin-off,” reported Jefferies.
Reliance Industries had listed Jio Financial Services through a spin-off in August 2023 with a price discovery process, in which the owner’s stake was noted to be 45.8% on the listing. So, an IPO or a spin-off are the options for Reliance to get Jio listed.
In case Jio gets listed through a spin-off using the stock exchanges’ price discovery process, Jefferies’ fair value for RIL is Rs 3,580, implying a 15% upside. Reliance shareholders would account for their stakes in Jio adjusted for RIL’s 66.3%.
If the IPO channel is chosen, RIL’s fair value would drop to Rs 3,365 in the base case after a 20% holding discount.
Jefferies’ Bhaskar Chakraborty suggests, “The strong performance of the stock prices of RIL and JFS since the event, as well as the less than majority stake of the owners in JFS, may tilt the owner to adopt the spin-off route for Jio.”
Since January 2024, RIL’s stocks have outperformed the Nifty 50 index, going up by 22%, while the latter surged by only 12%. As of now in the calendar year 2024, RIL shares have grown by 22%, hitting a 52-week high price of Rs 3,217.9 on BSE last Monday.
