How Jio is unlocking hidden value for Reliance shareholders

Investors in diversified conglomerates often grapple with what is known as the holding-company discount: the tendency for markets to value a parent company at less than the combined worth of its individual businesses. Reliance Industries Ltd (RIL) is a case in point, with its massive oil-to-chemicals business, digital powerhouse and sprawling retail operations all housed under one corporate umbrella.

The public listing of Jio Platforms Ltd (JPL) on 28 October now gives investors a choice: those seeking exposure to telecom and digital services can invest directly in Jio without having to take exposure to RIL's other businesses. In fact, analysts expect JPL's listing to trigger a re-rating of RIL shares.

“With Jio now listed separately, investors can clearly see the value of RIL’s stake in the business,” said Piyush Pandey, telecom analyst at Centrum Broking. “This has narrowed the holding-company discount from around 30% to approximately 20-25%, allowing RIL shareholders to capture more of the value previously unrecognised by the market.”

RIL shares settled 0.6% higher at ₹1,306.20, while Jio Platforms shares ended 1% higher at ₹1,437 on the BSE on Tuesday.

RIL’s re-rating

A holding-company discount arises when the market values a parent company at less than the combined worth of its businesses, often because investors struggle to evaluate them individually and assess how efficiently capital is allocated between them.

“Historically, conglomerate stocks carry a persistent holding-company discount,” said a Religare Broking report from 13 October. JPL’s listing gives RIL’s largest growth business an independent market valuation, making its contribution to the parent’s overall worth more transparent and potentially narrowing the holding-company discount, the report added.

With Jio valued at ₹13.5 trillion, RIL’s 65% stake in the company translates to around ₹8.8 trillion. Applying the reduced 25% discount brings the value attributable to RIL shareholders to approximately ₹6.4 trillion, Pandey said. The resulting re-rated value is reflected in RIL’s latest market capitalisation, which has risen to ₹17.5 trillion from approximately ₹16.15 trillion before Jio’s listing.

However, experts caution that the gains in RIL shares may also reflect a broader improvement in investor sentiment over the past five trading sessions, as Indian stocks benefit from a cooling global artificial intelligence trade.

Value unlocking

Nonetheless, Jio Platforms’ listing could unlock further value for RIL shareholders over the long term, says Vinay Jain, fund manager and head of research at Karma Capital. Separating businesses across distinct sectors gives them greater managerial autonomy, independent capital-allocation priorities and strategic focus to pursue their growth plans, he argued.

“Adani Enterprises is an example of how separately listed businesses can create shareholder value in the long run,” Jain added.

However, he noted that a demerger may not create additional economic value when businesses remain closely linked, as in the case of Vedanta. In such cases, the demerger allows investors to retain businesses with strong growth prospects and exit those that are underperforming or fail to meet their expectations, Jain said.

RIL an attractive bet?

So, does Jio’s listing make RIL a more attractive long-term multi-sector bet for investors seeking to benefit from the digital business’s growth? Experts caution that a higher JPL share price does not automatically translate into an equivalent increase in RIL’s valuation. If Jio’s market value rises but investors continue to apply a steep discount to RIL, much of that gain may not be reflected in the parent’s share price, said Pandey of Centrum Broking.

Eshaan Lazarus, founder and chief executive of digital broking platform 021 Trade, expects RIL to continue trading at a discount, given its significant dependence on Jio’s performance. For investors, the bigger question is how much they are effectively paying for RIL’s retail, refining and other businesses after factoring in the value of its Jio stake and the group’s ₹1.17 trillion debt, he said.

RIL’s valuations surged after strong September quarter (Q2) results. Its consolidated revenue rose nearly 30% year-on-year to ₹3.3 trillion, while net profit grew 40% to ₹25,500 crore, led by its oil-to-chemicals business, even as retail earnings declined.

Jio Platforms, meanwhile, reported 11% revenue growth to ₹40,500 crore. Its operating margins expanded to 54.1% from 51.6% a year ago, lifting net profit 14% to ₹8,387 crore in Q2 FY27 from ₹7,375 crore in Q2 FY26.

While Lazarus sees scope for JPL’s margins to expand further as it adds more customers, he cautions that such expansion may not be sustainable year after year. “With over 540 million subscribers already, I would watch how much more existing customers will pay, how many leave after a tariff hike, and how quickly broadband and enterprise customers pay back the cost of serving them,” he said.