Jio IPO: A Significant Valuation Catalyst in the Telecom Sector
Reliance Industries Limited’s (RIL’s) telecom unit is likely to enter the markets after its 33% sale of stakes to investors, including Facebook and Google.
CLSA believes that this separate listing of Reliance Jio could become a major catalyst for the telecommunication sector in the country. Jio’s pre-IPO $20 billion deal itself values it at 10 times enterprise value (EV)/EBITDA.
Further, Jio’s mobile business features a valuation of $99 billion EV at 11.5 times EBITDA. Meanwhile, CLSA values Jio’s broadband service – Jio Fiber at $5 billion.
Jio has already managed to gather around Rs. 1.52 lakh crores from various marquee investors, including Facebook, Intel Capital, Google, and Qualcomm Ventures. In addition, famous private equity firms, such as Vista Equity Partners, Silver Lake, KKR, and General Atlantic also took part in Jio’s 33% stake sale.
Investors’ sentiment around this mega IPO comes during a time when a fierce price war in the debt-burdened Indian telecom sector seems to diminish after a comprehensive tariff hike by the big three players – Bharti Airtel, Jio, and Vodafone Idea.
CLSA Recommends a Cut in 5G Spectrum Base Price
Brokerage firm CLSA recommends the Indian Government to cut the base prices of 5G spectrum in 2022. It said that a failure in doing so could result in an unsuccessful spectrum sale.
According to the brokerage, the $11 billion 4G spectrum purchases happened due to renewal constraints. However, the 5G auction will be successful only if there is a price cut from $7bn/100 megahertz for the entire country in the 3.3-3.6 gigahertz band.
It also mentions that a 5G spectrum price cut in 2022 followed by a successful auction could bring in better and improved opportunities.
In November, TRAI started fixing reserve prices for ten spectrum brands set aside for 5G services by the Government. These include the desired 600 megahertz and the mmWave bands. This auction will happen within the time frame of April to May 2022.
India saw a heightened IPO wave during 2021. This enthusiasm in the public market is likely to persist with the news of Reliance Jio joining the marathon. Jio’s solid parent organization will further reinforce the future initiatives of this telecom unit.
Source – TimesNow News
Frequently Asked Questions
- What is Reliance Jio’s market share?
As of 2021, Reliance Jio’s market share in the Indian telecom sector is around 39%.
- When was Reliance Jio founded?
It was founded in 2007.
- What is the expected total subscriber base reach of Reliance Jio?
Brokerage firms expect Jio’s subscriber base to reach 435-438 million by October to December quarter of 2022.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.