Reliance Jio Infocomm (Jio), the telecom division of Reliance Industries Ltd (RIL), may be valued at USD 112 billion when it goes public, according to a recent note from Jefferies. This is equivalent to 9.35 lakh crore at the current exchange rate of 83.49 dollars to rupees.
The foreign brokerage discussed two possible directions: an IPO route that is chosen, and a vertical spin-off route that is chosen for public listing. According to Jefferies, investors in RIL favor the latter option. Whatever the route, it anticipates a potential Jio public listing in 2025.
IPO direction(with holding comp. discount)
33.7 per cent of Jio's shareholders are minority. RIL can meet the requirements of the IPO by listing 10 per cent of Jio's ownership. Jio may have been an Offer for Sale (OFS) by minorities during the entire IPO.
But 35 per cent of an IPO is set aside for the retail segment, which calls for significant mobilization from retail investors (the oversubscribed retail portion may be distributed to HNI/QIB).
The report stated, "Our analysis suggests the Indian stock market imputes a holdco discount of 20–50 per cent to a listed subsidiary in arriving at a holdco's fair value, even though RIL would retain majority control after the listing."
Vertical Spinoff Direction
Better value unlocking and avoiding the discount for holding companies would result for RIL shareholders. Upon listing, the owner's share of Jio would decrease to 33.3 per cent.
We observe that at the time of listing, the owner held 45.8 per cent of the recently spun-off JFS. The owner of JFS may decide to go with the spin-off for Jio due to the company's strong stock price performance since the incident, according to Jefferies, as well as the fact that its owners own a smaller percentage of the company.
