Reliance Industries is shifting Jio Platforms' IPO from an offer for sale to a fresh issue due to investor disagreements on pricing. This move prioritizes protecting retail investors by allowing market determination of post-listing prices, with proceeds directly benefiting the company for debt repayment and expansion.

Jio IPO set to be fully fresh funding; no OFS

Synopsis

Reliance Industries is shifting Jio Platforms' IPO from an offer for sale to a fresh issue due to investor disagreements on pricing. This move prioritizes protecting retail investors by allowing market determination of post-listing prices, with proceeds directly benefiting the company for debt repayment and expansion.

Mumbai|New Delhi: Reliance Industries (RIL) is reworking the listing structure of telecom and digital venture Jio Platforms from the previously planned offer for sale (OFS) to a fully fresh issue due to differences with existing investors over pricing, said three people involved in the process.

India's largest telecom operator by market share, which is preparing for a mega initial public offering (IPO), has been locked in discussions for more than a month with global technology firms, sovereign wealth funds and private equity investors over the structure and pricing of the multi-billion-dollar issue.

Shareholders want to price the IPO to perfection, by selling shares at a higher price band. However, RIL is of the view that this may hurt retail investors in case of a listing day loss, the people said.

"There is an inherent conflict of interest, which is unique to Jio," said one of the persons cited above. "Shareholders want to price the issue as high as possible. But that creates two risks. First, the issue could become too large for markets to absorb."

Room for Upside

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This is "especially if it crosses $4 billion in the current environment. Second, there is a real possibility of a weak listing that impacts retail investors," said the person quoted.

A second person said the promoter's stance has been consistent. "Mukesh Ambani's priority from day one has been to protect retail investors," this person said. "There must be room for upside in the stock price post listing. Therefore, Reliance now plans to let the market determine the price post listing and PE investors can later sell in the open market if they wish."

With a fresh issue, all proceeds would accrue directly to the company, and shareholdings of all the existing investors will dilute proportionally. "About ₹25,000 crore could be utilised for debt payments, and rest of the funds could be used for other purposes, depending on the requirements," another person said.

A fresh issue at a more conservative price band would result in a scaling down of Jio's previously reported $133-154 billion valuation. It would also mean RIL's current shareholding of 67% in Jio would get diluted, instead of the OFS plan. However, RIL is said to be agreeable to this plan, people said. Jio is expected to file the draft prospectus with the Securities and Exchange Board of India within the next week or fortnight, potentially delaying the listing timeline by about a month, to July, the people said. The timelines, however, are subject to further change, depending on conditions.

Jio didn't respond to ET's queries.

In March, the company had planned an OFS, where each of its 14 equity investors would trim 8-8.5% of their holdings, translating into a nearly 2.8% equity dilution, ET reported at the time. None of the shareholders would have made a full exit.

Growth Path

In 2020, Jio Platforms raised more than ₹1.5 lakh crore ($20 billion) from 13 global investors, including Google, Meta, Saudi Arabia's Public Investment Fund, Vista Equity, KKR, Silver Lake, General Atlantic, Abu Dhabi Investment Authority, TPG, L Catterton, Intel Capital and Qualcomm Ventures, in a rapid fundraising round. The deals were among the largest in India's corporate history and helped make Jio Platforms net debt-free. Since then, the company has expanded across 5G, broadband, digital services and enterprise solutions.

Going forward, growth will rely on emerging areas such as home broadband, enterprise services, AI infrastructure, and deep-tech capabilities as well as 5G and satellite connectivity.

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