Barring a few companies, all the big IPOs that came in the last 5 years brought with them losses for investors. You can easily take the names of many such companies. Which is not at all necessary to be discussed here. Looking at the performance of these big IPOs, the confidence of investors has definitely been broken by such big IPOs. In such a situation, the IPO of Jio Platforms of the country’s largest company Reliance Industries can create a different confidence among investors with its strategy.
Experts say that this strategy can completely change the pricing of India’s biggest IPOs and people’s thinking about them. Recently, information had come out in media reports that Reliance is changing the method of proposed listing of Jio Platforms. Earlier there was a plan to bring it in the form of ‘Offer for Sale’ (OFS), but now it will be brought completely as a ‘fresh issue’. This change is being made after differences emerged with existing investors regarding price and valuation.
If this change is implemented, it will be completely different from many big public listings that have come recently. In those listings, existing shareholders used IPOs mainly to exit the company or cash out part of their investment. India’s two largest consumer-facing listings in recent times—Hyundai Motor India and LG Electronics India—were designed primarily for shareholder exits.
Although both these listings attracted the attention of institutional investors, the returns received after the listing did not completely live up to the expectations that were raised before the listing. Because of this, a huge debate has erupted over the discipline of setting prices in billion-dollar listings.
Jio’s strategy may change the story
Instead of selling shares held by global investors, bringing out a ‘fresh issue’ would mean that all the money raised from the listing would go directly to Jio Platforms. According to media reports, about Rs 25,000 crore of this money can be used to repay the company’s debt, while the remaining money can be used for investment in network expansion, AI infrastructure and digital services. The move comes after more than a month of negotiations between Reliance and Jio’s existing shareholders—which include global technology companies, sovereign wealth funds and private equity investors.
According to reports, some investors were insisting on keeping the valuation (market value) of the company high to maximize their returns. At the same time, Reliance’s focus was on keeping the price fair for common investors and that there should not be any major fall in the share price after listing. This could mean that the valuation at which Jio will enter the market may be lower than the range of $133-154 billion discussed earlier.
The market may get direction
Paresh Bhagat, chairman of Mangal Keshav Financial, said in an ET report that a completely ‘fresh issue’ by a giant like Jio can send a strong message to the market. He said that fresh issue means that the money is going directly into the company’s business. This is completely different from many such IPOs, which are mainly a means for existing investors to cash in their investments.
This may improve the thinking of investors, because the market sees it as capital being provided for the growth of the company rather than the exit of shareholders. Bhagat further said that if priced right, Jio could increase the market’s ability to handle large listings, and reset expectations for large consumer-tech and digital infrastructure IPOs.
Reliance’s stake may reduce
Analysts say that this changes the equation for Reliance also. Reliance currently holds about 67 percent stake in Jio Platforms, and if a new issue comes, the stake of all shareholders will be reduced proportionately. This means that Reliance’s stake will be diluted slightly, but the market may finally get a transparent and separate valuation of the telecom and digital business, which was hidden within the company’s larger structure for a long time.
Example for big IPO
Abhinav Tiwari, research analyst at Bonanza, said that if the scarcity and price of shares are managed properly, this structure can improve the performance of the listing. He said that in OFS, money simply moves from new investors to old investors. But in the new issue, every rupee raised goes directly into the business. This changes the thinking of investors. If the valuation is right, it can further increase investor confidence regarding the listing.
Jio’s successful listing could set a precedent for larger IPOs – especially at a time when startups, consumer brands and digital infrastructure businesses are preparing to enter the public markets. If Jio lists with a structure that allows ordinary investors to make money as well – and not just benefit existing shareholders – it could restore investor confidence in India’s billion-dollar IPO story.
