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HomeSHARE MARKETAmbani's New IPO: Top Brokerage House Has Revealed The Date; Wait For...

Ambani’s New IPO: Top Brokerage House Has Revealed The Date; Wait For Next Month

Reliance Jio IPO: India and Asia’s most wealthy man Mukesh Ambani hasn’t yet made any announcements regarding the IPO of the company he runs Reliance Jio.

However, investors believe that the recent rise in mobile rates could indicate the fact that Reliance Jio may be planning for an IPO soon.

The global investment banking company thinks that the business could get a blockbuster listing by 2025, with an estimated value that is $112 billion.

Due to the rise in mobile prices, Jio is now focusing on maximizing the 5G market. Industry experts and analysts believe that the future of Jio’s IPO could be revealed during the AGM that could be held by Reliance Industries next month.

Another expert stated that previously Jio did not lead the charge in increasing its tariffs, but lately, it was at the forefront of tariff increases.

The focus on monetization and growing the market share of subscribers is a sign that the company is working toward listing within the year 2025.

Ambani can choose two different options for listing Jio in the marketplace. The first is an IPO and the other option is a spin-off that is similar to Jio Financial Services (JFS).

Institutional investors are more inclined to go with the spin-off option since the discount for holding companies does not apply to the entity listed.

However, the IPO can help Reliance keep control of the majority over Jio following the listing.

What Are The Options?

Brokerage stated in a recent report that the main concern is the discount for holding companies. It is 20 percent to 50 percent in India.

In addition, raising large numbers of retail investors is a concern when it comes to an IPO. The smaller control stake in Jio upon spin-off is achieved by the purchase of a fraction of the shares provided by private equity firms following the spin-off.

If Reliance chooses to spin off and then lists Jio via the price discovery procedure, Reliance shareholders will receive their respective stake in Jio.

This will then be adjusted to reflect RIL’s 66.3 percent stake.

Expert stated that this would be able to avoid the Holdco discount, and Reliance shareholders would benefit from higher returns.

The stake of Reliance in Jio will drop to 33.3 percent when the company is listed. For Jio Financial, Reliance’s stake was 45.8 percent on the listing.

Based on the impressive results that the shares have shown in RIL in the past and JFS stocks, Reliance may adopt a similar path for Jio.

However having the 33.7 percent minor shareholding in Jio, Reliance can also be able to meet the IPO requirement by putting up 10 percent of the shares.

How Can The IPO Be?

Brokerage stated that, since Jio is now out of the high-cost stage of capital expenditure, its entire IPO could be a potential offering for sale.

However, 35 percent of the IPO is designated for retail investors. This will require the mobilization of many retail investors.

If Jio is separated from Reliance and is subsequently deemed to be a separate entity, according to the Brokerage its fair market value for Reliance shares would be Rs 3,580, which is 15 percent more than the current value.

If an IPO occurs then the fair value of the company will be Rs 3,365 in the initial scenario after considering the 20 percent discount on holding.

Reliance shares have increased by over 22 percent over the last year. The last Monday, it reached a record of Rs 3,217.9 at the BSE.

Disclaimer: The information on this site is only for informational and educational purposes and shouldn’t be considered financial advice or stock recommendations. 

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