Global brokerage firm Nomura has outlined its projections for the anticipated Initial Public Offering (IPO) of Jio Platforms Ltd, indicating a potential valuation adjustment for its parent company, Reliance Industries Ltd (RIL). Concurrently, Nomura has highlighted Bharti Airtel Ltd as an attractively valued peer, poised to benefit significantly from upcoming tariff hikes.
Jio IPO Valuation and RIL Impact
Nomura anticipates Jio Platforms' IPO price band to be set between Rs 1,065 and Rs 1,119 per share. This range implies an equity valuation of Rs 9.8-10.3 lakh crore, or $101-107 billion, for the entire entity. After factoring in FY26 net debt and IPO proceeds, the enterprise value (EV) is estimated at Rs 10.9-11.4 lakh crore, or $113-118 billion. This valuation is 11-15 percent below Nomura's existing $133 billion EV target for Jio Platforms.
The brokerage notes that RIL's 66.4 percent stake in Jio Platforms post-listing would be valued at Rs 481-506 per Reliance share. Applying a 20 percent holding company discount, this value drops to Rs 385-405 per share, representing 33-35 percent of Reliance's share price as of October 9. This creates a valuation gap of Rs 136 per share compared to Nomura's current sum-of-the-parts (SOTP) valuation for Jio Platforms within RIL, which does not account for a holding company discount. However, Nomura suggests that RIL's recent stock correction (down 26 percent year-to-date) might already compensate for this slightly lower valuation and holding discount.
Bharti Airtel: A Top Pick Amidst Sector Shifts
In contrast, Nomura maintains a 'Buy' rating on Bharti Airtel, setting a target price of Rs 2,360 per share, while its target for Reliance is Rs 1,690 per share. The brokerage considers Bharti Airtel attractively valued and better positioned to capitalize on future tariff increases.
Key reasons for Bharti Airtel's favorable outlook include:
- Tariff Hike Advantage: With the period of easy subscriber gains likely concluding, tariff hikes are expected to be the primary driver of earnings growth for telecom operators. Bharti Airtel, with its higher proportion of premium subscribers, is better insulated from potential downtrading and subscriber attrition following anticipated tariff hikes.
- Strong ARPU Growth: During the July 2024 tariff hike, Bharti Airtel recorded the strongest average revenue per user (ARPU) growth among its peers, outperforming Jio, which saw subscriber downgrading among its value-conscious customer base.
- Superior Subscriber Retention: Post-tariff hike, Bharti Airtel demonstrated robust subscriber retention, adding 2 percent subscribers over the subsequent three quarters, while Jio experienced a 0.3 percent subscriber loss during the same period.
Nomura's analysis indicates an implied FY28F EV/Ebitda multiple for Jio at 10.5-10.9 times at the proposed IPO valuation. In comparison, Bharti's India telecom business (adjusted for investments) is valued at an implied FY28F EV/Ebitda of 9.2 times. This represents a 12-15 percent discount for Bharti, which Nomura believes is unjustified and expects to narrow once Jio goes public.