Jio Platforms has bucked the poor track record of India’s biggest share sales, handing investors a rare bright spot amid a bruising equity sell-off as it began trading in Mumbai.
Shares of billionaire Mukesh Ambani’s telecoms and digital services company jumped 27 per cent to 1,417.50 rupees ($14.90) at the close, after it raised a record $3.1 billion in India’s biggest initial public offering. The rally valued Jio at $137 billion, making it India’s second-most valuable listed company after parent Reliance Industries and lifting the Ambani empire past Tata Group as the country’s most valuable conglomerate.
“It is a bumper listing and highly welcome in the current market situation,” said Shankar Sharma, founder of GQuant Investech. “Sometimes a big listing can alter the mood of the investing nation, and we all hope Jio does that to the Indian market.”
In the build-up to the deal, led by Akash Ambani, the patriarch’s eldest son, executives pitched Jio as a full-throttle technology company rather than simply Reliance’s telecoms arm. Its valuation ultimately fell short of some earlier expectations as Indian stocks fell and global markets turned volatile. Still, strong demand for the offering had raised expectations of a robust start.
The listing also marked a milestone for the next generation of the Ambani family, decades after Mukesh helped work on Reliance’s IPO at the age of 20. Four generations of the family took the stage for the bell-ringing ceremony in Mumbai, including matriarch Kokilaben Ambani, in a show of family unity.
The ceremony was heavy on emotion and nostalgia. Akash told investors Jio would create value for the next 50 years, much as Reliance had over the previous five decades, while siblings Isha and Anant struck a similar note. Mukesh appeared visibly moved at several points, according to a video feed streamed on the National Stock Exchange of India’s YouTube channel.
The listing has also shuffled the pecking order among India’s top business houses. Reliance Group has now become India’s most valuable conglomerate, with a combined market capitalisation of more than 30 trillion rupees. Shares of Reliance, which holds two-thirds of Jio, fell 3.2 per cent at the close, their steepest decline in more than five months.
Jio’s strong start also defied the recent record of India’s biggest IPOs, which have often stumbled out of the gate. The four IPOs that raised at least $2 billion this decade posted a weighted-average decline of 9.9 per cent on their first day, with only one – the NSE last month – recording a gain on debut.
The longer-term picture is hardly more encouraging. Each of India’s five biggest previous IPOs is now trading below its offer price, underscoring how blockbuster share sales have often struggled to reward investors.
Hyundai Motor India, whose 279 billion-rupee IPO held the record before Jio’s, trades about 4 per cent below its offer price. The NSE, which raised about $2.4 billion last month, has also slipped below its issue price.
Valuation picture
Still, some analysts see Jio as better placed for longer-term gains. Nomura Financial Advisory and Securities (India) initiated coverage with a buy rating, citing its market leadership and the prospect of an improvement in free cash flow. Analysts, including Bineet Banka set a target price of 1,340 rupees.
Risks remain. Jio depends on telecoms licences and spectrum, with delays in approvals, non-renewal of licences or difficulties acquiring additional spectrum threatening to weigh on the business, according to Religare Broking.
Valuation is another concern. Jio’s market value is nearing that of US telecoms companies AT&T and Verizon Communications, despite it generating only a fraction of their revenue, while user revenue in India has barely grown over the past two decades, according to Anurag Singh, founder of Ansid Capital.
“At 14 per cent annual growth, Jio could take 20 years to match AT&T’s revenue, a stark reminder that even great businesses can deliver poor returns when investors overpay,” he said.
For now, investor optimism is being underpinned by extraordinary demand for the offering. The deal attracted more than $78 billion of bids and nearly 14 million applications.
The premium is supported by Jio’s market leadership, improving monetisation and strong cash generation, according to Geojit Investments.
“Jio’s expansion has helped accelerate digital adoption, which in turn has brought millions of Indians into the financial ecosystem, including the stock market,” said Raamdeo Agrawal, chairman and co-founder of Motilal Oswal Financial Services. “Jio’s growth potential remains significant.”
