Reliance may list Jio at $112 billion valuation next year, Jefferies says

Reliance Industries, India’s most valuable company, may consider spinning off its telecom arm Jio for a public listing as early as 2025, Jefferies said in a research note, with investors favouring this route over an initial public offering. The move follows Jio’s recent focus on monetisation and market share gains, signaled by its leading role in tariff hikes.

The spinoff option is gaining traction due to concerns over the holding company discount prevalent in the Indian market, where listed subsidiaries often trade at a 20-50% discount when held by a parent company. While an IPO would allow Mukesh Ambani-led Reliance to maintain majority control of Jio, it risks undervaluing the telecom giant within Reliance’s market cap.

Jio, which serves more than 475 million wireless subscribers, raised about $20 billion in 2020 from investors including Meta, Google, General Atlantic, KKR, Silver Lake, Mubadala, TPG, Abu Dhabi Investment Authority, and Intel and Qualcomm. Jio was valued at $58 billion pre-money during the 2020 investments. Airtel, Jio’s chief rival in India, has a market cap of nearly $98 billion. Bank of America gave Jio a valuation of $107 billion last year.

Image: Jefferies

A spinoff would see Reliance shareholders receive proportionate ownership in Jio, potentially leading to a more accurate standalone valuation. It would reduce the controlling stake of Reliance’s owners to 33.3%, down from the current 66.3%.

Reliance has long been anticipated to list Jio and Reliance Retail, the nation’s largest retail chain. In a surprise move last year, Reliance demerged its financial services offering and listed Jio Financial Services. Since its August 2023 separation, Jio Financial Services’ stock has surged 40%, while Reliance has outperformed the Nifty index by 1,100 basis points.

Jefferies said that the success of Jio Financial Services’ spinoff last year could serve as a model for how the firm views potential listings of Jio and Reliance Retail.

Jefferies analysts estimate a public listing could value Jio at $112 billion, potentially driving a 7-15% upside for Reliance’s stock. They project a fair value of 3,580 rupees per share for Reliance in a spinoff scenario, compared to 3,365 rupees for an IPO, assuming a 20% holding company discount.

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