Reliance Shares Reflect 36% Discount on Jio Platforms Valuation
Investors may find a more affordable route to Jio Platforms through Reliance Industries as analysts highlight significant discounts.
Reliance shares indicate a 36% discount on its Jio stake.
Jio's IPO could value the company at ₹11 lakh crore ($114 billion).
Reliance shares have declined 23% this year amid market pressures.
In a recent analysis, Reliance Industries Ltd. is being viewed as a potentially cost-effective method for investors to acquire stakes in Jio Platforms Ltd. once its telecom unit goes public. Analysts suggest that the current share price of Reliance reflects a notable discount of approximately 36% on its two-thirds ownership in Jio, as noted by Nimish Maheshwari, co-founder of Beat The Street.
Maheshwari points out that while such discounts are typical for parent companies, the current valuation may not justify a discount exceeding 25%. This assessment aligns with how the market values holdings of telecom competitor Bharti Airtel Ltd. in its publicly listed subsidiaries. Thea Jamison, managing director at Change Global Investment, elaborates that while discounts could reach up to 50%, there is insufficient technical or fundamental reasoning for such a drastic reduction in this case.
According to Bloomberg News, Jio is expected to pursue a valuation of around ₹11 lakh crore ($114 billion) in its upcoming initial public offering (IPO), which could place Reliance's stake at approximately ₹7.3 lakh crore, representing about 45% of the parent company's market value. Brokerages such as Motilal Oswal and Yes Securities estimate the value of Reliance's stake per share to be between ₹331 and ₹450, indicating it constitutes around 27% to 37% of the total share price.
The share price of Reliance has seen a decline of 23% this year, contrasting with a 14% drop in the Nifty 50 Index, primarily due to rising oil prices, high global bond yields, and a depreciating rupee. Mukesh Ambani's conglomerate is particularly vulnerable to these economic pressures, given its diverse interests in energy and consumer sectors.
The future value for Reliance shareholders may hinge on Jio's performance post-listing. Maheshwari emphasizes that the primary catalyst for narrowing the discount will be effective price discovery rather than immediate monetization. A successful public-market valuation for Jio could enhance the perceived value of Reliance's holdings, thereby reducing the holding-company discount. Furthermore, a clearer understanding of Jio's valuation would facilitate a more accurate assessment of Reliance's remaining businesses, according to Chokkalingam G., founder of Equinomics Research, who anticipates that the listing will lead to a reevaluation of Reliance's core operations.
