Nomura says Reliance’s steep share-price fall has more than absorbed the impact of a lower-valued Jio listing, while Bharti Airtel’s discount should narrow once its rival goes public.
Nomura has argued that Reliance Industries has already absorbed much of the likely impact from the coming Jio Platforms listing, saying the stock’s sharp decline this year appears to more than offset the prospect of a lower valuation and the usual holding company discount. The brokerage also said Bharti Airtel’s current valuation gap with Jio is hard to justify and should narrow once Jio is publicly traded.
Bloomberg reported that Jio Platforms may price its initial public offering at between Rs 1,065 and Rs 1,119 a share, implying an equity value of roughly Rs 9.8 lakh crore to Rs 10.3 lakh crore, or $101 billion to $107 billion. After adding forecast net debt for the current financial year, including deferred spectrum and lease liabilities, and subtracting IPO proceeds, the implied enterprise value rises to about Rs 10.9 lakh crore to Rs 11.4 lakh crore, or $113 billion to $118 billion. Nomura said that is still below its own $133 billion target, which is based on 12 times expected EBITDA in June 2028, and that the implied FY28 EV/EBITDA multiple of 10.5 to 10.9 times is below the 12 times multiple it sees for both Jio and Bharti Airtel.
The investment bank said Reliance’s 66.4 per cent stake in Jio would still be worth about Rs 481 to Rs 506 per Reliance share after the listing, equal to 41 per cent to 43 per cent of Reliance’s market price at the time of its analysis. Applying a 20 per cent holding company discount reduces that contribution to Rs 385 to Rs 405 a share, or 33 per cent to 35 per cent of the stock price as of October 9. Even so, Nomura said Reliance’s share price has already fallen enough to account for the valuation difference. It noted that the stock was down 26 per cent year to date, compared with a 14 per cent fall in the Nifty index, while Jio’s debut could also shift investor focus towards growth and pricing discipline in India’s telecom sector.
Nomura kept its Buy rating on Bharti Airtel and maintained a target price of Rs 2,360 a share, calling it the more attractive way to play the sector. The brokerage said Bharti’s larger share of premium customers should leave it better insulated if a fresh tariff increase prompts some users to trade down or leave, and it pointed to the company’s stronger performance during the July 2024 tariff rise, when Bharti posted the biggest rise in average revenue per user among peers and retained subscribers more effectively than Jio. Nomura said Bharti’s current valuation discount to Jio is unwarranted and should narrow once Jio lists, especially as easy subscriber gains fade and tariff hikes become the main engine of earnings growth.
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