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Reliance Shares May Offer Discounted Exposure to Jio Listing
Reliance Industries owns about two-thirds of Jio Platforms.
Jio may sell shares to the public in an IPO soon.
Some analysts say Reliance shares currently value its Jio stake at less than that stake may be worth.
This kind of gap can happen because people who buy a parent company’s shares do not directly own shares in each business it controls.
If Jio’s shares trade at a high value after listing, Reliance’s stake could become more visibly valuable.
That might reduce the gap, but it is not guaranteed.
Jio’s possible IPO valuation is about ₹11 lakh crore, or $114 billion.
Reliance shares have also faced pressure from oil prices, bond yields and a weaker rupee.
Reliance Industries shares imply about a 36% discount on its roughly two-thirds stake in Jio Platforms, according to analyst Nimish Maheshwari.
Jio may seek a valuation of about ₹11 lakh crore ($114 billion) in an IPO as soon as this month, Bloomberg News reported.
At that valuation, Reliance’s Jio holding would be worth about ₹7.3 lakh crore, or roughly 45% of Reliance’s current market value, Bloomberg calculations indicate.
Brokerages value the Jio stake at ₹331–450 per Reliance share, representing about 27%–37% of the parent’s share price.
Reliance shares have fallen 23% this year, compared with a 14% decline in the Nifty 50; analysts say Jio’s trading after listing could affect the parent-company discount.
- Who
- Reliance Industries, Jio Platforms and analysts including Nimish Maheshwari and Thea Jamison.
- What
- Analysts say Reliance shares may provide discounted exposure to its Jio stake ahead of a possible Jio IPO.
- Where
- India; Reliance Industries is based in Mumbai.
- When
- Jio may seek an IPO as soon as this month; Reliance shares have fallen 23% this year.
- Why
- A parent-company discount means Reliance’s market price may not fully reflect the value of its Jio holding; a public listing could make that value more visible.
Discount may narrow
Discount may persist
How much Jio’s value is reflected in Reliance
Discount may narrow
Nimish Maheshwari says the current implied discount is about 36%, while roughly 25% is sustainable; transparent price discovery for Jio could help narrow the gap.
Discount may persist
Thea Jamison notes that parent-company discounts are common because shareholders have only indirect exposure to subsidiaries, and the eventual benefit depends on how Jio trades after listing.
Potential value creation
Discount may narrow
A higher public-market valuation for Jio could make Reliance’s holding visibly more valuable and support its shares.
Discount may persist
Reliance’s eventual value creation also depends on how it chooses to monetise its Jio stake; a listing does not itself guarantee that the discount will close.
Key facts
- Reliance stake in Jio
- About two-thirds
- Potential Jio IPO valuation
- About ₹11 lakh crore ($114 billion)
- Estimated value of Reliance’s Jio stake
- About ₹7.3 lakh crore, based on the reported potential IPO valuation
- Reliance share discount on Jio stake
- About 36%, according to Nimish Maheshwari; he considers about 25% sustainable
- Brokerage estimates for Jio stake per Reliance share
- ₹331–450, or about 27%–37% of Reliance’s share price
- Share performance this year
- Reliance fell 23%; the Nifty 50 declined 14%
- Potential influences on Reliance shares
- Higher oil prices, elevated global bond yields and a weaker rupee
Quotes
Nimish Maheshwari
Co-founder of independent research firm Beat The Street.
“Moreover, how Reliance Industries chooses to monetise its stake in Jio Platforms going forward could be another significant source of value creation for shareholders.”
livemint.com
“The key trigger would be transparent price discovery rather than immediate monetisation.”
livemint.com
Sources
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