A big update is coming regarding Jio IPO. According to people associated with the process of this IPO, Reliance Industries is changing the way of listing of its telecom and digital venture Jio Platforms. Earlier there was a plan of 'Offer for Sale' (OFS), but due to differences regarding the price with existing investors, it is now being completely changed to 'Fresh Issue'. India's largest telecom company by market share, which is preparing for a big 'Initial Public Offering' (IPO), has been in talks with global tech companies, sovereign wealth funds and private equity investors for more than a month on the structure and pricing of this billion-dollar issue.
Why is there no discussion on OFS?
Shareholders want the IPO price to be kept right, that is, the shares should be sold at a higher price band, but, Reliance believes that if the price of shares falls on the day of listing, it may cause loss to small investors (retail investors). In the ET report, one of the people associated with the process said that there is an internal conflict of interest in it, which is seen only in the case of Jio.
He said that shareholders want the issue price to be kept as high as possible. But this creates two types of risks. First, the issue may be so big that the market may not be able to handle it completely. The second risk is that there is every possibility of the listing being weak, which will have a direct impact on small investors.
Another person in the know told ET's report that the promoter's stance has been the same since the beginning. He said that Mukesh Ambani's first priority has always been to protect the interests of small investors. He further said that there must be scope for increase in share price after listing. Therefore, now RIL has decided that after listing the share price will be decided by the market itself, and if private equity (PE) investors wish, they can later sell their shares in the open market.
Where will the money be spent?
All the money received through the 'fresh issue' will go directly to the company, and the shareholding of all existing investors will be diluted in the same ratio. Another person said that out of this money, about Rs 25,000 crore can be used to repay the loan, and the remaining money can be used for other purposes as per the need.
If the 'fresh issue' is issued with a more cautious price band, it would mean that Jio's valuation - which was earlier reported at $133-154 billion - would now be lower than that. Another meaning of this would be that Reliance's existing 67 percent stake in Jio would be reduced (dilution), whereas this does not happen under the OFS plan.
However, people say that Reliance agrees with this plan. People said that Jio is expected to submit its draft prospectus to SEBI within the next week or fifteen days, which may delay the listing deadline by about a month and may go till July. However, there may be further changes in these deadlines depending on the circumstances.
In March, the company had planned an OFS in which each of its 14 equity investors was asked to reduce 8-8.5 per cent of their holding. Due to this, the equity was estimated to decrease by about 2.8 percent. No shareholder had decided to exit completely.
What is the path of growth?
In 2020, Jio Platforms had raised more than Rs 1.5 lakh crore ($20 billion) from 13 global investors in a rapid fundraising round. These investors included Google, Meta, Saudi Arabia's Public Investment Fund, Vista Equity, KKR, Silverlake, General Atlantic, Abu Dhabi Investment Authority, TPG, L Catterton, Intel Capital and Qualcomm Ventures. This deal was one of the biggest deals in India's corporate history. He helped in making Jio Platforms completely debt-free. Since then, the company has expanded into 5G, broadband, digital services and enterprise solutions. Going forward, the company's growth will depend 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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