Reliance Jio, the telecom arm of Mukesh Ambani’s Reliance Industries Ltd (RIL), is likely to go public in 2025 at a valuation of $112 billion, according to investment banking firm Jefferies. This potential IPO is highly anticipated and could have significant implications for the Indian stock market.
Timing and Valuation
Jefferies believes the Jio IPO could happen in 2025, as the company has concluded its pan-India 5G rollout and is now focusing on monetizing its 5G services. The investment bank pegs Jio’s current valuation at around $75 billion, but expects it to reach $112 billion by the time of the IPO. This would make it one of the largest IPOs ever in India.
Listing Options
Reliance has two options to get Jio listed – an IPO or a spin-off like the recently listed Jio Financial Services (JFS). Institutional investors favor the spin-off route as it would avoid the conglomerate discount typically applied to diversified companies in India. However, an IPO would allow RIL to retain majority control over Jio after the listing.
Potential Impact on RIL Shares
Jefferies estimates that if Jio is spun off, RIL’s fair value would be Rs 3,580, implying a 15% upside. However, if Jio is IPO-ed, RIL’s fair value would fall to Rs 3,365 in the base case after considering a 20% holding discount. This highlights the importance of the listing structure for RIL shareholders.
Monetization and ARPU Focus
Analysts believe Jio’s potential listing in 2025 is likely to make it more amenable to higher tariffs in 2024 to boost its growth and appeal to investors. This could involve withdrawing unlimited 5G data plans and pricing 5G services above 4G rates to drive up the average revenue per user (ARPU).
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Competitive Landscape
The Jio IPO could intensify the competition in the Indian telecom sector, as rival Bharti Airtel is also making inroads into the African market. The stage is set for another Ambani-Mittal battle, as Mukesh Ambani’s Reliance expands its telecom footprint across the continent.
In conclusion, the potential Reliance Jio IPO in 2025 is a highly anticipated event that could have far-reaching implications for the Indian stock market. The timing, valuation, and listing structure will be crucial factors in determining the impact on RIL’s share price and the broader competitive dynamics in the telecom industry.