Reliance Jio Infocomm Ltd, the telecom arm of Reliance Industries Ltd (RIL), is poised for a significant IPO in 2025, with a projected valuation exceeding Rs 9.3 lakh crore, according to a Jefferies report. The note, dated July 11, suggests Jio could list at a $112 billion valuation, potentially boosting RIL’s share price by 7-15%.

Jefferies has maintained a ‘buy’ rating on RIL stock, setting a target price of Rs 3,580 per share, indicating a 13% upside from the last closing price of Rs 3,164. RIL’s share price has surged over 22% since January, outperforming the Nifty 50 index, which has gained 12% in the same period.

The entire IPO is likely to be an offer for sale (OFS) by minority shareholders. Jefferies noted that RIL might opt to spin off Jio and list it post a price discovery process, similar to the recent listing of Jio Financial Services (JFS) through a spinoff. Both domestic and foreign investors seem to favor this spin-off route due to the avoidance of the holdco discount typically applied to listed subsidiaries.

In August 2023, RIL successfully spun off its financial services arm, Jio Financial Services, using a price discovery method. For Jio’s potential listing in 2025, the scenario of a spin-off versus an IPO is under consideration. A spin-off would avoid the holding company discount and better unlock value for RIL shareholders, while an IPO would require listing only 10% of Jio as per SEBI regulations.

Assuming a spin-off, Jefferies estimates RIL’s fair value at Rs 3,580, reflecting a 14% upside. In the base case of an IPO, the fair value would be Rs 3,365, adjusted for a 20% holding company discount. In a bullish scenario, the value could rise to Rs 3,700, representing an 18% upside.

Jio has been a leader in telecom tariff hikes while keeping feature phone tariffs unchanged, demonstrating its focus on monetization and market share gains. These strategic moves strengthen the case for a public listing in 2025.

Shareholders of RIL are expected to receive proportionate shares in Jio, adjusted for RIL’s 66.3% stake, to prevent the holding company discount. On listing, RIL’s ownership in Jio would reduce to 33.3%. The performance of RIL and JFS stocks post spin-off supports the preference for this route.

Institutional investors generally prefer spin-offs to avoid steep holding company discounts. In India, this discount ranges from 20-50%, while in Korea and Taiwan, it can be as high as 50-70%. The challenge of mobilizing large retail investors for an IPO is another consideration favoring a spin-off.

Reliance Jio Infocomm Ltd’s potential IPO or spin-off in 2025 represents a significant opportunity for RIL and its shareholders. With strategic moves focusing on market share and monetization, Jio is well-positioned for a successful public listing, whether through an IPO or spin-off.

Reliance Industries Ltd. (RIL) shares ex-Jio Financial Services (JFSL) have been valued at ₹2,580 per share, while Jio Financial Services is priced at ₹261.85 per share after the special pre-opening session.

The demerger of Jio Financial Services, the financial arm of the Mukesh Ambani-led conglomerate, took place today at a ratio of 1:1. Market experts are optimistic about the prospects of the newly formed entity, JFSL, on Dalal Street.

“Jio financials is effectively valued at ₹261.85 per share. They have roughly 620 crore shares. That values Jio financials technically at ₹160,000 crore (roughly $20 billion),” said Deepak Shenoy, Founder, Capital Mind.

“But don’t go overboard, Jio Financial Services shares haven’t actually traded. What this means is that in the Nifty, Jio Financials will be valued at ₹160,000 crore. temporarily (until it eventually lists, when it will be removed). Oh, this will be so crazy for all the index funds when they get new inflows,” Shenoy said in a tweet.

Reliance Industries has successfully demerged its financial arm, Jio Financial Services (JFS), with the newly created entity valued at around $20 billion, exceeding analysts’ forecasts.

JFS’s stock price was set at 261.85 rupees during a special pre-open call auction, higher than the estimated 160 to 190 rupees. Shareholders will receive one JFS share for each Reliance share they hold.

The conglomerate’s move to expand into the financial services sector has been seen as strategic, given JFS’s non-bank financial company license.

With JFS’s access to valuable data from Reliance’s telecom and retail businesses, it is expected to embark on lending activities. The stock will be included in major Indian indices, and trading will begin upon listing, which is likely to be announced during Reliance’s upcoming annual general meeting.

Jio Financial Services, the financial arm demerged from Reliance Industries, is set to commence trading on the NSE Nifty 50 from July 20. Reliance Industries renamed its financial services division as Jio Financial Services and will also include it in the Nifty 100, Nifty 200, Nifty 500, and other sectoral indices, as announced by the National Stock Exchange.

A special pre-open session will be held on July 20 to mark the demerger. Jio Financial Services will be added to various Nifty indices, including Nifty50, Nifty10, Nifty200, Nifty500, Nifty50 Equal Weight, Nifty100 Equal Weight, Nifty500 Multicap 50:25:25, Nifty Commodities, Nifty Energy, and more.

Shareholders eligible for shares from the demerged entity will receive one fully paid-up equity share of face value ₹10 for each share of Reliance as of the record date, as per the scheme of arrangement.