Reliance Jio IPO Likely In 2025 At $112-Billion Valuation, Says Jefferies

India's primary market could witness yet another mega issue as Mukesh Ambani's Reliance Jio Infocomm Ltd. could potentially be listed in calendar year 2025, according to Jefferies.

The telecom company is focusing on monetisation and subscriber market share gains, by leading the way in the recent tariff hikes while keeping feature phone tariffs unchanged, the brokerage said in a July 10 note.

"These moves create a case for a possible public listing in CY25," said Bhaskar Chakraborty, equity analyst, Jefferies, in the note. Reliance Jio could look to IPO or spin-off Jio, as it did with Jio Financial Services Ltd., it said.

The decision to spin off or go via the public offering route depends on balancing the upside potential of full value unlocking in the spin-off with the lower controlling stake, Jefferies said.

If the telecom major takes the IPO route, there would be better control but would impute a holding company discount of 20-50% and would require large retail mobilisation. With a 33.7% minority shareholding in the telecom company, Reliance Industries Ltd. could fulfil the IPO requirement by listing 10% of Jio. "However, 35% of an IPO is reserved for the retail segment that would require large mobilisation from retail investors."

On the other hand, the vertical spin-off route would avoid the holding company discount and enable better value unlocking benefiting RIL shareholders. But, the owner's stake in Jio would fall to 33.3% on listing, Jefferies said.

Based on these factors, domestic and foreign investors appear to favour the spin-off route for Jio's potential listing, the brokerage said.

Jio could list at a valuation of $112 billion, implying a 7-15% upside to its parent Reliance Industries, Jefferies said. If Jio is spun off, the fair value for RIL would be Rs 3,580 per share, implying 15% upside, whereas if they take the IPO route, RIL's fair value would fall to Rs 3,365 apiece in the base case, the note said.