Mumbai: Reliance Industries Ltd. may offer investors a cheaper way to own Jio Platforms Ltd. after the telecom unit lists, with analysts saying the parent company’s shares reflect a substantial discount.
Reliance’s share price implies a roughly 36% discount on its two-thirds stake in Jio, according to Nimish Maheshwari, co-founder of independent research firm Beat The Street. He sees about 25% as sustainable, in line with how the market values telecom rival Bharti Airtel Ltd.’s holdings in its listed subsidiaries.
Such discounts are common for parent companies because their shareholders only get indirect exposure to the businesses they own. Once a subsidiary lists, investors can simply buy its shares directly.
While these discounts could go as high as 50%, there’s no strong technical or fundamental justification for such a steep discount here, said Thea Jamison, managing director at Change Global Investment. “Moreover, how Reliance Industries chooses to monetise its stake in Jio Platforms going forward could be another significant source of value creation for shareholders.”
Jio may seek a valuation of about ₹11 lakh crore ($114 billion) in an initial public offering as soon as this month, Bloomberg News reported. That would value Reliance’s stake at about ₹7.3 lakh crore, equivalent to about 45% of the parent’s current market value, according to Bloomberg calculations.