Mumbai – The impending Initial Public Offering (IPO) of Jio Platforms Ltd (JPL) is poised to reshape investor dynamics within India's telecom sector, according to a recent analysis by domestic brokerage Motilal Oswal Financial Services (MOFSL). While some market participants fear a potential reduction in exposure to Bharti Airtel Ltd once another major telecom option lists, MOFSL suggests these concerns are overblown.
MOFSL highlights that JPL's initial free float is expected to be limited to around 3%, contrasting with Bharti Airtel's already broad ownership base among Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs). The brokerage views the Jio IPO, which is reportedly seeking an ₹11 lakh crore ($114 billion) valuation, as a potential re-rating trigger for Bharti Airtel.
Impact on Bharti Airtel Valuation
Despite Jio's market leadership in wireless and home broadband, which grants it significant influence over industry pricing, MOFSL points to Bharti Airtel's superior free cash flow generation and higher Return on Capital Employed (RoCE). MOFSL's ascribed valuation of approximately 12 times FY28E EV/Ebitda for both JPL and Bharti's India business suggests valuation parity. Bharti’s diversified portfolio, including stakes in Indus Towers, Airtel Africa, Nxtra's data center business, and financial services via Airtel Money, further strengthens its case for comparable valuation.
Implications for Reliance Industries (RIL)
For Reliance Industries, which holds a nearly 66.4% stake in JPL, the listing could introduce a holding company (holdco) discount. However, MOFSL believes RIL's stock already factors in an 18-36% holdco discount. While investors seeking direct exposure to digital services will gain an option through JPL, RIL will continue to offer a broader investment thesis, encompassing India's largest retail and integrated energy businesses, alongside emerging growth optionalities in new energy, data centers, AI, and FMCG.
Anticipated Tariff Hikes
The delay in telecom tariff hikes has impacted the share performance of both Bharti Airtel and RIL. MOFSL now projects a smartphone tariff hike of around 15% in December 2026, following the JPL IPO and Vodafone Idea Ltd's planned fundraise. This anticipated hike is expected to provide visibility for approximately 15% EBITDA Compound Annual Growth Rate (CAGR) over FY26-29E for the sector.
MOFSL's Investment Stance
MOFSL has reiterated its 'BUY' ratings on both Bharti Airtel and Reliance Industries, citing a compelling risk-reward scenario. The brokerage prefers Bharti Airtel for its improved free cash flow, deleveraging efforts, and ongoing premiumisation strategy. For investors seeking pure-play exposure to high-growth wireless and home broadband with lower capital allocation risks, MOFSL suggests JPL. RIL is favored for its current valuations, which are closer to its bear case, and the likelihood of higher O2C (Oil to Chemicals) earnings in the near term. MOFSL maintains a 'Neutral' stance on Indus Towers, Tata Communications, and Vodafone Idea.
Overall, the Jio Platforms listing at an ₹11 trillion valuation is expected to catalyze a re-rating for Bharti Airtel and unlock further value in Reliance Industries, while strengthening the case for sector-wide tariff adjustments.