UPDATE 1 — India's Reliance, Airtel rally as Jio Platforms IPO recasts valuations
(Adds analyst comments in paragraphs 8-10) By Bharath Rajeswaran and Mridula Kumar Oct 15 (Reuters) — Reliance Industries rose more than 3% on Thursday, its biggest intraday rise in over two months, after the IPO pricing of its telecom unit Jio Platforms, as investors bet the listing would unlock additional value for the conglomerate. Shares of Bharti Airtel, Jio's main rival and the country's second-biggest carrier, also rose 4.3% in their biggest intraday jump in five months. Analysts said Jio's listing is expected to be a gauge for valuations across the sector. Jio, which upended the telecom sector in 2016 after launching with free voice and cut-price data plans, set a price band of 1,065 rupees to 1,119 rupees on Wednesday, valuing it at up to $108 billion. The standalone valuation of Jio Platforms, currently bundled with Reliance's retail, oil-to-chemicals and new-energy businesses, could make the parent's residual holding of 64.5% relatively easier to value, according to two analysts, with investors also likely viewing Reliance as an attractive proxy. Nomura estimated that the telecom unit would trade at a slight premium to Airtel, putting their ratio of enterprise value to e
(Adds analyst comments in paragraphs 8-10) By Bharath Rajeswaran and Mridula Kumar Oct 15 (Reuters) — Reliance Industries rose more than 3% on Thursday, its biggest intraday rise in over two months, after the IPO pricing of its telecom unit Jio Platforms, as investors bet the listing would unlock additional value for the conglomerate. Shares of Bharti Airtel, Jio's main rival and the country's second-biggest carrier, also rose 4.3% in their biggest intraday jump in five months. Analysts said Jio's listing is expected to be a gauge for valuations across the sector.
Jio, which upended the telecom sector in 2016 after launching with free voice and cut-price data plans, set a price band of 1,065 rupees to 1,119 rupees on Wednesday, valuing it at up to $108 billion. The standalone valuation of Jio Platforms, currently bundled with Reliance's retail, oil-to-chemicals and new-energy businesses, could make the parent's residual holding of 64.5% relatively easier to value, according to two analysts, with investors also likely viewing Reliance as an attractive proxy.
Nomura estimated that the telecom unit would trade at a slight premium to Airtel, putting their ratio of enterprise value to earnings before interest, taxes, depreciation and amortization (EV/EBITDA) at 10.5X-10.9X and 9.2X, respectively. Reliance was last trading 3.4% higher at 1,214 rupees. The record $3.2 billion IPO would also establish a visible market benchmark for Jio, which not only has the country's largest user base but also carries about 60% of data traffic, according to its IPO filing with India's securities regulator.
This would help investors gauge the valuation of the telecom sector as a whole, said Arun Kejriwal, founder of Kejriwal Research and Investment Services. "A listed Jio would almost certainly become a major valuation reference point for Bharti Airtel," added Aishvarya Dadheech, founder and CIO at Fident Asset Management. "But this need not be a zero-sum equation.
A successful Jio listing could actually deepen investor interest in the telecom sector." While Airtel offers stronger monetisation, with higher average revenue per user, a premium post-paid base, enterprise capabilities and pricing discipline, Jio brings greater scale, heavier data usage and a broader consumer ecosystem, the two analysts said. Airtel was last up 3.8% to 1,862 rupees. ($1 = 95.0625 Indian rupees) (Reporting by Mridula Kumar and Bharath Rajeswaran in Bengaluru; Editing by Sonia Cheema and Janane Venkatraman) ((mridula.kumar@thomsonreuters.com)