Can Jio Platforms’ initial public offering (IPO) break the jinx of largely disappointing mega issues such as Hyundai Motor India and the National Stock Exchange of India? Well, for the sake of Reliance Retail’s expected IPO over the next couple of years, it is critical that Jio’s IPO is successful.
Let's first look at the pricing. Jio holds promise when viewed purely as a telecom company. At the upper end of its price band of ₹1,065-1,119 apiece, the size of ₹30,213 crore will make it the biggest public issue in India’s capital market history.
Jio’s annualized FY27 EPS (earnings per share) could be about ₹35, based on the June quarter (Q1FY27) results, after factoring in a 3% rise in the number of equity shares post-issue, which means a price-to-earnings (P/E) multiple of 32 at ₹1,119. On FY28 estimates, the P/E could be lower if Jio decides to improve average revenue per user (Arpu) instead of focusing on garnering more customers.
So, a 10% growth in quarterly mobile revenue from ₹31,000 crore in Q1 means about ₹12,000 incremental revenue annually. Applying an average tax rate of 25.5%, profit after tax could grow by almost ₹9,000 crore a year.
So, the P/E multiple could drop to almost 25 in FY28 if there is just a 10% increase in Jio’s mobile revenue led by higher mobile Arpu. Thus, the valuation multiple becomes attractive for a telecom company, which is typically seen as a utility stock.