Who will be the first off the mark is something that is being debated and discussed within billionaire Mukesh Ambani-controlled conglomerate Reliance Industries and there is a high probability of Reliance Jio Infocomm going public first, ahead of other businesses.

Top officials in the group are talking in favour of the telecom services company making its public markets debut first and listing it as it is seen as a more mature business, said sources with knowledge of internal discussions.

While discussions are still in the initial stages, the company is looking at a potential valuation in the region of $100 billion, and a share price in the vicinity of ₹1,200 per share. Most analysts have pegged Jio’s valuation at around $82-94 billion. A hike in mobile tariffs, expected later this year, is expected to give a boost to the valuations.

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A key factor that is guiding the thinking is that it will also provide a much-needed exit for the handful of private equity and other investors who pumped in over $20 billion into the company in 2020. The IPO will have a large offer for sale components.

RIL did not respond to an email request for comment.

In FY24, Reliance Jio Infocomm reported a revenue of over ₹1-lakh crore and net profit of ₹20,607 crore. It contributed over a tenth of RIL’s total revenue and around 29 per cent of its net profit. While Reliance Retail has a higher revenue contribution, Jio’s share at the net level and at the EBITDA level has been considerably higher.

Monetisation plans

The telecom business is a cash-guzzler, requiring massive amounts of investments not only to buy spectrum but also to set up infrastructure. The digital services business, housed under Jio Platforms (of which RJio is a subsidiary) has received the major portion of the funding over the last few years. It ended FY24 with capex of ₹53,600 crore, a good part of which was spent on 5G rollout. Free cash flows were negative in FY24 and return on capital employed was low due to a rise in network capex, cash interest costs and higher invested capital base.

Industry sources pointed out that 5G penetration and services in India have been barely scratched. Compared to China which had around 3.38 million 5G sites at the end of 2023, in India it had just about crossed 4 lakh. The experience in terms of speed and connectivity has been not up to the claims made by the telcos. More investments are obviously needed. RIL has indicated that it will be scaling down capex and most of it would be met through internal accruals.

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Reliance Jio was launched in 2016. As it scaled up rapidly accumulating subscribers with its discounted pricing strategy, it was tacitly understood that it would be tapping the equity markets fairly early in the game.

In 2020, Ambani sold about a third in Jio to 13 foreign investors including Meta (9.9 per cent), Google (7.73 per cent) and others such as Silver Lake, KKR, Public Investment Fund of Saudi Arabia and Qualcomm valuing the company at that time 57-64 billion. The IPO plans were put on the backburner and chatter then veered towards Reliance Retail.

There is now a different narrative or thinking at work internally.

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