RIL preparing for Jio IPO next year, retail business to go public much later

Reliance Jio IPO: Reliance Industries Ltd (RIL) aims to list its subsidiary Jio Platforms Ltd, which houses the country’s largest telecom company, in 2025, two people familiar with the development said.

Preparations for the initial public offering (IPO), potentially India’s largest, have already begun, but bankers for managing the share sale are yet to be appointed, they added, requesting anonymity.

On Monday afternoon, Reuters reported that RIL chairman Mukesh Ambani was planning to list his telecommunications company Jio on the stock exchanges by 2025. Analysts value the company at more than $100 billion, although there hasn’t been any internal decision yet on Jio’s valuation. In July, Jefferies had pegged the firm’s estimated IPO valuation at $112 billion.

The conglomerate’s retail division’s public offering is expected to occur much later due to pending operational matters, the news agency reported.

“Jio Platforms Ltd will not be demerged, the way Jio Financial Services was, and will be a fresh listing. It has been crystallized that it will be a subsidiary structure that will be taken to the market in 2025," the first person cited earlier said.

The second person familiar with the ongoing discussions said that while the IPO would give existing investors an exit, a majority of their holding is likely to remain under the non-promoter category. At present, RIL holds 67% in Jio Platforms while investors including private equity players hold the rest. In 2020, strategic investors including Meta and Google picked up 18% in Jio Platforms, while private equity investors like KKR, Silverlake and the Public Investment Fund of Saudi Arabia bought 15% in the entity, for a total of ₹1.5 trillion. Jio recently also joined hands with tech giant Nvidia, a global leader in artificial intelligence (AI) processors, for developing AI data centres in the country.

Reliance Jio Infocomm Ltd, a fully owned subsidiary of Jio Platforms, houses the group’s telecom services business, offering voice and data services to more than 479 million consumers in the country, and is the largest player in the market. Jio entered the telecom sector in 2016 by offering free voice services at a time when voice was charged and brought down data or per-gigabyte tariffs to near-ground levels, making India a market offering one of the lowest data tariffs in the world. Reliance Jio Infocomm also houses some old data centres and some of the other digital services under its fold. Jio Platforms, on the other hand, has investments in several startups, which are also step-down subsidiaries of the entity.

India’s telecom sector is in a far better place than a few years ago with competitive intensity easing and tariffs going up, said sector watchers, adding that the sector will continue to be an effective duopoly between Jio and Bharti Airtel Ltd, India’s second-largest carrier, and the government supporting Vodafone Idea Ltd.

“The sector has seen three tariff hikes since 2021, and more are expected as telcos want the ROCE (return on capital employed) to rise. In fact, Jio led the tariff hikes in June this year, unlike the previous occasions when Airtel had led the hikes,” said a senior sector analyst who did not want to be named.

Jio, Airtel and Vodafone Idea raised telecom tariffs by 10-21% for all plans and made unlimited 5G plans chargeable as opposed to earlier when 4G and 5G plans were being given at the same tariffs. Airtel’s managing director and vice-chairman Gopal Vittal said in the Q2 earnings call that ROCE for the sector had to rise from the current 11% which was very low, and added that tariff repair was urgently needed.

A senior Reliance Jio official had earlier told Mint that the bulk of Jio’s capital expenditure on network rollouts was already done when it rolled out three times the number of 5G sites that Airtel did since October 2022 when it launched the service, totalling about 100,000 sites. “Now is the time for recouping the investments with tariff hikes,” the official had said, asking not to be named.

Jio also reported a 7% spike in the average revenue per user (Arpu), a key metric in the telecom sector, to ₹195.1 after three flat quarters. It reported an 18% growth in revenue to ₹31,709 crore in the quarter ended September. Ebitda improved 18% to ₹15,931 crore, while profit grew 23% to ₹6,539 crore. Ebitda is short for earnings before interest, taxes, depreciation and amortization.

Bernstein Research said in a report last month that it estimates Reliance Jio will be the sixth-most0valuable telecom operator globally by market capitalization at $150 billion, in case of a debt-free spin-out.

On the other hand, Reliance Retail’s IPO is being delayed due to competition in the retail space largely due to quick commerce, with players like Swiggy set to launch their initial share sale, said the first person cited earlier who is aware of the RIL’s IPO plans for its retail business. Reliance’s consumer retail business, which includes Reliance Smart, Reliance Digital and Trends stores, saw its revenue decline 1% year-on-year in the September quarter to ₹76,302 crore, but profit grew 1% to ₹2,836 crore.

Back in 2019, Ambani had said that Reliance Jio and Reliance Retail, the group’s retail venture, would progress toward listing within five years.