The note said Jio could list at a USD 112 billion valuation and add 7-15% upside to the Reliance Industries share price.
(Photo: AFP)
The telecom unit of Reliance Industries Ltd, Reliance Jio Infocomm Ltd, could be headed for a mega IPO in 2025, with a potential valuation of more than Rs 9.3 lakh crore, a Jefferies note said on Thursday.
The note said Jio could list at a USD 112 billion valuation and add 7-15% upside to the Reliance Industries share price.
“Assuming Jio is spun off from Reliance Industries’ stable, our fair value for RIL stock would be Rs 3,580. If IPO-ed, RIL’s fair value would fall to Rs 3,365 in the base case (adjusted for 20% holding company discount),” Jefferies said.
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Jefferies target price, in case of a spin-off, implies a 14% upside in their base case scenario.
Further, Jefferies said that the entire IPO could be an offer for sale by minority shareholders. RIL could look to spin off Jio and list it after a price discovery, the brokerage said, adding that both domestic and foreign investors appear to favour the spin-off route for Jio listing.
In their bull case, they value RIL stock at Rs 3,700, implying 18% upside.
Operationally, Jio was the first telecom services provider to announce tariff hikes. It, however, kept the feature phone tariffs unchanged. This, analysts said, showed Jio’s focus on monetisation and subscriber market share gains.
“These moves create a case for a possible public listing in CY25 in our view. RIL could look to IPO or spin off Jio, as it did with Jio Financial Services (JFS),” Jefferies said.
According to Jefferies, shareholders in Reliance Industries would receive their proportionate shareholding in Jio adjusted for RIL’s 66.3% stake in the latter.
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 listing.
“With 33.7% minority shareholding in Jio, RIL could fulfill IPO requirements by listing 10% of Jio. While RIL would retain majority control after the listing, our analysis suggests the Indian stock market imputes a holdco discount of 20-50% to a listed subsidiary in arriving at a holdco’s fair value,” it said.
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