Reliance Jio Shares Plans of Likely IPO in Latter Half of 2020 After Investment in Demerged Companies

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Reliance Industries Limited (RIL) has said that it is pondering upon the option of making an Initial Public Offering (IPO) for its telecom unit, Reliance Jio Infocomm in the latter half of 2020 according to an ET Telecom report. However, Reliance Industries also added that its priority would remain searching investor for its fibre and tower firms which it had demerged last year. Notably, these two infrastructure investment trusts (InvITs) own the company’s tower and fibre assets. One person aware of the matter said that in the last month or so, multiple meetings have taken place with bankers, executives and consultants, thus pointing towards increased talks of the IPO.

Reliance Jio Experiencing Declining ARPU

The person aware of the matter said, “The telecom company has informed bankers that it expects to topple competition on the subscriber front shortly, which would bring in more revenue, and roll out its fibre to home (FTTH) network, all of which will ensure a successful IPO.” Another person close to Reliance Jio said that there are hovering concerns about the falling average revenue per user (ARPU) of Reliance Jio. The telecom operator has experienced decreasing ARPU for five consecutive quarters, and the ARPU has fallen from Rs 131.7 in the Oct-Dec quarter to Rs 126.2 in the Jan-Mar quarter. On the other hand, the incumbent telcos like Bharti Airtel and Vodafone Idea have witnessed increasing ARPUs in these months.

It is also worth noting that Reliance Jio was the only telecom operator to post profits in the March quarter, which was 65% up from last year with a 56% rise in revenue. However, the sequential profit of Reliance Jio was only 1% as opposed to 22% last year. This was majorly due to declining ARPU and higher network and depreciation and amortisation expenses.
Brokerage IIFL has estimated the value of telecom unit’s enterprise around $63 billion (Rs 4.41 lakh crore). The competitive telco, Bharti Airtel had a market capitalisation of nearly Rs 1.79 lakh crore at the close of Thursday market day.

Three Investment Banks to Help Reliance Jio Find Investors

Reliance Industries Limited, however, has clarified that it will only look forward to the initial public offering of Reliance Jio unless it sees investment in its two tower and fibre asset, Jio Digital Fibre Pvt Ltd and Reliance Jio Infratel Pvt Ltd respectively. In a development related to this, Brookfield Asset Management has been revealed to be close to investing in a portfolio of 170,000 towers, which is valued at Rs 36,000 crore. Reliance Jio after its demerger of the tower and fibre asset firm has transferred a debt of Rs 1.07 lakh crore to the two units, after which its own debt stood at Rs 67,000 crore at the end of March quarter.

According to the analysts, the company will need the capital for the rollout of its fibre-to-the-home (FTTH) service in the country, and it will also be investing in 5G infrastructure to support the new technology. The three investment banks, Moelis, Citi and ICICI Securities, have been appointed by the telecom operator to reach out to investors for the two demerged firms of Reliance Jio. These banks are also likely to help Reliance Jio in its IPO.

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Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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