Reliance Jio’s Initial Public Offering may launch this year

According to brokerage firm CLSA, Mukesh Ambani’s telecom firm Reliance Jio could go public this year at a valuation of around $100 billion. Following the recent 33 percent equity sale to 13 investors, including almost 10% to Facebook and 8% to Google in 2020, CLSA analysts believe RIL’s telecom business Reliance Jio may see an IPO / separate listing. According to TRAI data, Reliance Jio is the country’s largest telecom service provider, with 426.5 million mobile subscribers by the end of October 2021.

The IPO of Jio is a major trigger for sector value

The separate IPO of Reliance Jio, according to CLSA, might be a stimulus for India’s telecom sector. “We believe the Reliance Jio IPO will be a sector valuation catalyst, with the leader’s pre-IPO $20 billion transactions pricing itself at 10x EV/Ebitda, while our selection Bharti Airtel trades at a 25% discount on EV/Ebitda,” it said. CLSA analysts value Reliance Jio at $99 billion EV, which includes $5 billion EV for JioFiber, at 11.5 times EV/Ebitda.

Airtel vs. Jio

According to brokerage firms, Reliance Jio is likely to have a total customer base of 435-438 million by the end of the October-December quarter. Bharti Airtel, the country’s second-largest telecom carrier, is projected to post a total subscriber base of 318-323 million. Bharti Airtel, on the other hand, outperforms Mukesh Ambani’s Jio in terms of ARPU. According to ICICI Direct, Jio’s third-quarter ARPU is likely to be approximately Rs 151 per subscriber, up 5% from the previous quarter, while Bharti Airtel’s ARPU is expected to be Rs 164, up 6.6 percent from the previous quarter.

Reliance Jio had 39 percent of the telecom market share in 2021, but it lost 11 million members due to non-payment as a result of pandemic-driven churn in the July-September quarter. “The leader faces problems from a high number of inactive users and a lack of post-paid subscribers,” CLSA said. In 2022, Reliance Jio’s launch of the entry-level smartphone ‘JioPhone Next,’ co-developed with Google, could minimize churn/conversion of incumbent 2G subscribers, according to the brokerage firm.

Tariff increases in telecommunications

Reliance In November of last year, Jio announced tariff increases for JioPhone Next and Jio. “However, with R-Jio prepaid pricing continuing at a 7-20% discount to Bharti and VIdea, we anticipate 44 percent revenue share by the financial year 2024, with 486 million 4G subs at an ARPU of Rs 193,” CLSA added. The company is bullish on the telecom sector, expecting revenue to rise thanks to price increases, increased 4G penetration, and the transition to 5G in 2022. Analysts also believe that any reduction in AGR dues would be beneficial to the sector’s expansion.