Reliance Jio IPO Valuation May Exceed ₹9 Lakh Crore: Jefferies Prediction

Reliance Jio Infocomm Ltd, the telecom division of Reliance Industries Ltd, might be gearing up for a significant IPO in 2025, with an estimated valuation exceeding ₹9.3 lakh crore, according to a Jefferies report. The note, dated July 11, suggests that Jio could list at a $112 billion valuation, potentially boosting Reliance Industries' share price by 7-15%.

Jefferies has maintained a 'buy' rating on Reliance Industries shares, setting a target price of ₹3,580 per share, indicating an upside of over 13% from the last closing price of ₹3,164. Since January, RIL's share price has surged more than 22%, outpacing the Nifty 50's 12% gain.

The brokerage noted that the entire IPO might be an offer for sale by minority shareholders. Reliance Industries may consider spinning off Jio and listing it after price discovery, a method favored by both domestic and foreign investors.

In August 2023, Reliance Industries spun off its financial services arm, Jio Financial Services, listing it through a price discovery method.

In June, Reliance Jio Infocomm unveiled new tariff plans offering users unlimited data, a move Jefferies interpreted as a focus on monetization and increasing market share. Following Jio's lead, rivals Bharti Airtel and Vodafone Idea also introduced new tariff plans.

"Jio leading the way in recent tariff hikes while keeping feature phone tariffs unchanged shows a focus on monetization and market share gains. These actions make a public listing in CY25 plausible," the report stated.

For Jio's listing, the company has two options: an IPO or a spin-off similar to Jio Financial Services (JFS).

Jefferies noted concerns about the holding company discount, which ranges from 20-50% in India and is even steeper (50-70%) for conglomerates in Korea and Taiwan. Additionally, mobilizing large retail investors for an IPO is challenging. A potential solution could be reducing the controlling stake in Jio post-spin-off by acquiring shares from private equity funds.

"This approach would avoid the holding company discount and unlock better value for RIL shareholders. The owner's stake in Jio would decrease to 33.3% upon listing. For comparison, the owner's stake in the recently spun-off JFS was 45.8%. The strong performance of RIL and JFS stocks post-spin-off, despite the owner's minority stake in JFS, might incline the owner to choose the spin-off route for Jio," Jefferies added.