Reliance Jio's Anticipated IPO: Potential Stock Price Impact on Reliance Shares

Reliance Jio IPO: A Fresh Issue of Shares Amid Pricing Disagreements

Reliance Jio, the telecom and digital arm of Reliance Industries Limited, is reworking its highly anticipated initial public offering (IPO) into a fully fresh issue of shares, dropping the earlier plan for an offer for sale (OFS) component. The decision comes after a month-long tussle over pricing between existing investors and the promoter group.

According to a report by The Economic Times, existing shareholders are keen on keeping the issue price as high as possible. However, Reliance Industries believes aggressive pricing could hurt retail investors if the stock lists at a loss on debut. The company is likely to submit its draft red herring prospectus (DRHP) to the Securities and Exchange Board of India (SEBI) within the next two weeks, although the schedule may shift depending on market conditions.

The proposed IPO, which could raise up to $4 billion, is expected to become India's biggest-ever public offering. Around ₹25,000 crore from the total funds proposed through the Jio IPO may be allocated towards reducing debt, while the remaining amount could be used for other corporate requirements.

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Comparison of Proposed IPO Structure

Reliance Industries holds a 67% stake in Jio and is willing to see its shareholding diluted under this structure. In 2020, Jio Platforms had secured ₹1.52 lakh crore from marquee investors such as Google, Facebook (now Meta), Vista Equity Partners, Silver Lake, ADIA, TPG, L Catterton, Saudi Arabia's Public Investment Fund, General Atlantic, Mubadala, Intel Capital, KKR, and Qualcomm Ventures in exchange for a 32.9% stake.

The filing, initially expected as early as March, has been delayed as IPO activity weakened after the conflict in West Asia erupted, dampening investor appetite for new listings. According to Abhinav Tiwari, Research Analyst at Bonanza, this is a meaningful but not a fireworks moment. Reliance's 67% holding in Jio will get slightly diluted, but it keeps firm promoter control.

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Mahesh M Ojha, VP Research & Business Development at Kantilal Chhaganlal Securities, noted that there are several positive triggers for Reliance Industries stemming from the potential IPO of Jio Platforms. The listing is expected to unlock significant value and could lead to a re-rating of the business. Fresh capital raised through the IPO would further strengthen Jio's balance sheet, while Reliance, as the majority shareholder, stands to benefit substantially from the value creation.

The proposed offloading is likely to remain limited at around 2.5%, which could help offset concerns related to the holding company discount due to the relatively low free float. Reliance share price has remained negative in the near-term, with a 7% decline in the past week and 0.38% decline in the past month. The stock has also descended over 15% on a year-to-date (YTD) basis and 8% in a year.