Jio Platforms listing: Jefferies expects vertical split, but don’t rule out IPO
Why Reliance’s investors opposed board roles for Saudi businessman and Khaitan While JFSL’s split led to 46% promoter shareholding, close to a simple majority of 51%, the same exercise may give RIL’s promoters a mere 33% stake in Jio Platforms. Jefferies offers them a solution — raise their stake in Jio after the listing to bring it closer to 51%, as they did with JFSL. But there’s a problem.
Increasing their stake in Jio Platforms to 51% would require far more resources than doing so in JFSL. Based on its current market price, the cost of increasing their stake in JFSL to 51% would be about ₹10,000 crore. This is a tiny sum for the promoters, considering their net worth is ₹10 trillion.
However, increasing their stake in Jio Platforms to 51% would actually make a dent. The company’s market capitalisation is likely to be around ₹10 trillion, so buying an 18% stake later could cost ₹1.8 trillion, or about 18% of the promoters’ net worth. Also read | Chart Beat: Reliance Jio’s free cash flow slips into negative territory in FY24 The other option is to go for a public issue.
In that case, RIL would maintain its shareholding at 66% and give the promoters more control over the company. Sure, it might attract a holding-company discount, which could be about 20% in the base case, according to analysts at Jefferies. This would value RIL around 5% less than Jefferies’ sum-of-the-parts valuation from a vertical split.
In other words, RIL’s market capitalisation and the promoters’ stake would be worth 5% less – hardly a big price to pay to retain a controlling stake. The Jefferies report, dated 10 July, highlighted that it could be difficult to fill the retail investors’ quota in a public issue as the offering would be huge. Then
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