Reliance Jio IPO: SEBI's Proposed Minimum Float Rules Remove Liquidity Hurdle Ahead Of RIL AGM

Reliance Jio IPO: Market regulator SEBI's recent proposal to modify the minimum public offer requirements for large IPOs can have meaningful positive implications for Reliance Jio’s potential market debut.

The SEBI has proposed to give big IPO- bound companies some respite in following the 25% minimum public shareholding norm. While there is no change for the small and mid-sized companies having a market cap of up to Rs 50,000 crore, large firms valued above Rs 1 lakh crore will be allowed to launch smaller IPOs than currently mandated, and will be given a longer time to reach the 25% public shareholding mark, as per the proposal.

For issuers with a post-IPO market cap of Rs 5 lakh crore, the minimum public offer size will be reduced from 5% to 2.5% of post-issue capital, as per the proposal, noted analysts at Citi Research. The brokerage values Jio Platforms at an enterprise value of $135 billion and equity value of $120 billion.

"A 5% public offer would amount to $6 billion of share supply, which is fairly large for the Indian market to absorb, especially as 35% is reserved for retail investors (SEBI has decided to retain this). A 2.5% public offer for Jio would amount to $3 billion of share supply, which we believe not only reduces the supply overhang at the time of the IPO but could also limit holding company discount concerns for RIL," Citi said.

A smaller public offer could also limit the holding company discount concerns for Reliance Industries Ltd., after the listing of Jio. The market will be turning its focus on the Reliance Industries AGM scheduled on Aug. 29 for updates on the Jio IPO plan, especially against the backdrop of the favourable regulatory changes. Citi maintained its 'Buy' rating on the RIL stock with a target price of Rs 1,690.

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