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Jio’s tariff hikes and 5G monetisation suggest impending IPO

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In Short:

Reliance Jio is considering an IPO, possibly the largest in India, as it raises mobile tariffs and monetizes its 5G business. Analysts expect clarity on the IPO at the upcoming RIL AGM. Jio’s valuation is around $133 billion currently. The company raised tariffs and changed 5G pricing to boost revenue and attract investors. The IPO could lead to more focus on revenue generation and ARPU growth in the telecom sector.

Reliance Jio preparing for India’s largest IPO, analysts say

Kolkata: Reliance Jio Infocomm taking the lead in raising mobile tariffs and moving to monetise its 5G business could be an indication of the telecom market leader readying for an initial public offering that could be India’s largest, analysts said. Some of them expect an IPO as soon as early next year.

Anticipated IPO Announcement

Analysts and industry executives expect clarity on Jio’s big-bang IPO at parent Reliance Industries Ltd’s annual general meeting, likely next month.

“The stage is now set for the telecom market leader’s much awaited IPO in the near future,” said Mayuresh Joshi, head of equity research at the Indian unit of US-based William O’ Neil & Co.

Brokerage firm Jefferies said it would look out for any developments on Jio’s listing at the upcoming RIL AGM, adding: “Rising focus on monetisation could be a precursor to its imminent listing.”

Jio did not respond to ET’s request for comment.

Potential Valuation and Impact

Following the latest tariff hike and 5G monetisation moves, Jio is valued at around $133 billion (Rs 11.11 lakh-crore), according to Jefferies.

At this valuation, a Jio IPO could turn out to be India’s largest by far. Current rules require companies with a valuation of Rs 1 lakh crore or more to sell at least a 5% stake in the IPO (for smaller companies, the minimum is 10%), which means Jio’s share sale could be worth Rs 55,500 crore based on the current valuation assigned by Jefferies.

Foreign Funds and Financial Improvements

Foreign funds may seek to exit as Mukesh Ambani-led RIL holds a 67.03% stake in Jio Platforms Ltd. Analysts anticipate improving financials for Jio, with potential growth in revenue and profit compounded annually through FY24-27.

Last month, Jio hiked tariffs and initiated effective monetisation of 5G services, prompting similar responses from competitors like Bharti Airtel and Vodafone Idea.

Experts predict Jio’s IPO in the background of these improving financials and tariff adjustments.

Analysts’ Views

According to Nitin Soni, senior director at Fitch, Jio’s tariff hikes and 5G monetisation will boost its ARPU by at least 15-20% in the next 12 months, positively impacting revenue growth.

Rohan Dhamija, from Analysys Mason, believes Jio’s tariff moves will drive market economics and 5G monetisation, positively impacting the telco’s valuations.

BofA Securities said “any potential IPO of Jio in future could also be sentimentally positive” for the telecom sector as all telcos would remain focused on improving their cash generation.

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