Jio IPO fully subscribed in hours
Billionaire Mukesh Ambani‘s Jio Platforms Ltd. saw its initial public offering fully subscribed on the opening day, positioning the digital venture to achieve India’s largest-ever listing. By 10:40 a.m. local time, bids exceeded the 197.5 million shares on offer within the first two hours, according to data on BSE Ltd.’s website.
The portions reserved for institutional and wealthy investors were subscribed 3.25 times and 26 per cent, respectively. Retail investors bid for nearly 23 per cent of the shares set aside for them.
A decade after entering the Indian telecom sector with free calls and low-cost data that wiped out competitors, the company is targeting a landmark IPO. It seeks a valuation roughly 10% lower than its nearest sector rival, Bharti Airtel Ltd.
The listing marks billionaire Ambani’s return to the capital market after 20 years, an offering that he said will “unlock great value” for parent Reliance Industries Ltd. However, a closer look paints a more sobering picture, with Reliance shares on track for their worst annual performance since 2011.
Jio Faces Market Saturation
Jio’s adjusted market value indicates rapid market saturation, with investors now favoring firms that generate higher revenue per customer rather than those with broader subscriber bases. Analysts Bineet Banka and Abhishek Bhandari from Nomura Holdings Inc. noted in a report that Jio must demonstrate growth to public shareholders.
Jio’s $3.1 billion share offering values the company at $107 billion at the top end of its price range, compared to Bharti Airtel’s roughly $123 billion. On paper, Jio surpasses Bharti in most metrics, leading in wireless and fixed broadband with over 500 million subscribers.
However, Jio’s average revenue per user (ARPU) has trailed Bharti Airtel for seven consecutive years, per Bloomberg data. In the June quarter, Bharti’s ARPU was ₹264, while Jio’s stood at ₹216.
Jio’s profits show a similar trend, with Bharti leading the industry with a 57.4 per cent margin on earnings before interest, tax, depreciation, and amortization, compared with 53.3 per cent for Jio. As a result, Jio is valued at 33.2 times trailing earnings versus Bharti’s nearly 37 times.
Ambani’s Cautious Approach
In the past, Mukesh Ambani has successfully disrupted the Indian telecom market with Jio’s aggressive strategy, triggering a price war that left only a single competitor profitable. However, this time around, Ambani’s upstart is coming to the market more cautious and humble, seeking a valuation lower than its nearest sector rival.
For Mukesh Ambani, this was his second attempt at getting mobile phones right and follow his father’s advice to make phone calls as cheap as postcards. Progress on his first venture halted abruptly in 2005, when younger brother Anil ended up with the communication portfolio after an acrimonious succession battle.
IPO Subscription Period
The Jio IPO opened its books for retail investors on Wednesday, for a subscription period that ends October 23. Anchor investors, including BlackRock Inc., Fidelity Management & Research, Capital Group, and Allianz SE, took stakes worth a combined $854 million at the top end of the marketed range.
A listed Jio Platforms plans to pre-pay a substantial chunk of its debt with the money raised from the IPO. Mukesh’s oldest son Akash, who is leading the IPO, remains optimistic about his company’s growth prospects.
