Reliance Jio IPO: RIL’s Telecom Arm May List by 2025 at $112 Billion Valuation, Says Jefferies | Stock Market News

Reliance Jio, backed by Mukesh Ambani’s Reliance Industries Ltd (RIL), might go public next year with a valuation of $112 billion, according to global brokerage firm Jefferies. Jefferies’ positive outlook is based on Jio’s recent tariff hikes, which are aimed at increasing revenue and expanding its market share.

Possible Public Listing in 2025

Jefferies believes that these measures could lead to a possible public listing in 2025. RIL might choose to IPO or spin off Jio, similar to how it spun off Jio Financial Services (JFS). Institutional investors prefer a spin-off to avoid the typical holding company discount of 20-50%.

On Thursday, shares of Reliance traded slightly higher at ₹3,173.20 each on the National Stock Exchange. The stock has risen 22% this year, partly due to the positive sentiment around Jio.

Jefferies noted that spinning off or launching an IPO for India’s largest telecom provider would balance the potential value unlocked against the downside of holding a smaller controlling stake.

IPO vs Spin-Off

While an IPO would require mobilizing a large number of retail investors, a spin-off could be managed by acquiring shares from private equity funds. Jefferies estimates that Jio could list at a $112 billion valuation, offering a 7-15% upside to RIL. If Jio is spun off, RIL’s fair value would be ₹3,580, implying a 15% upside. If the IPO route is taken, the fair value would fall to ₹3,365 due to the holding company discount.

Regulatory Norms and Shareholding

If Reliance opts for an IPO, it could meet regulatory norms by listing 10% of Jio through an offer for sale by minority shareholders. Currently, RIL holds 66.3% in Jio Platforms, with Facebook, Google, and private equity investors holding 10%, 7.7%, and 16%, respectively.

Jefferies pointed out that 35% of an IPO is reserved for the retail segment, which would require significant mobilisation from retail investors. Any unsubscribed retail portion could be allocated to high net-worth individuals (HNI) or qualified institutional buyers (QIB).

Despite retaining majority control post-listing, the Indian stock market typically imposes a 20-50% discount on the value of listed subsidiaries when determining a holding company’s fair value.

Spin-Off Benefits

Listing post-spin-off and price discovery could also be considered, as RIL shareholders would receive their proportionate shareholding in Jio adjusted for RIL’s 66.3% stake, avoiding the holding company discount and enabling better value unlocking for shareholders.

Jefferies noted that the owner’s stake in Jio would fall to 33.3% on listing. The recent spin-off of JFS, where the owner’s stake was 45.8% on listing, performed strongly, which may encourage Reliance to consider the spin-off route for Jio.

Regulatory Norms and Shareholding

In March last year, RIL spun off its financial services business, Jio Financial Services, which underwent price discovery in July at ₹261.85 per share and began trading in August. The promoter group later increased its stake from 45.8% to 47.12%. Shares of Jio Financial have surged about 40% since listing, while RIL’s stock price has risen 40% over the same period, outperforming the Nifty by 1100 basis points, according to Jefferies.

Looking at the positives, Reliance shareholders are likely to prefer the spin-off route. Jefferies mentioned that investors, both domestic and foreign, seem to favour the spin-off route for Jio’s potential listing. For Reliance Industries, the lower controlling stake in Jio after the spin-off could be addressed by buying part of the shares offered by private equity funds.