Jio IPO fever grips telecom stocks: Airtel, Vodafone Idea & others rise up to 4%

ETMarkets.com

Bharti Airtel shares gained 3.88% to Rs 1,869 while Indus Towers advanced 1.29% to Rs 384.30. Vodafone Idea shares gained nearly a per cent to Rs 12.81.

Shares of Reliance Industries rose 2.59% to Rs 1,206.35.

Jio Platforms has fixed the price band for its IPO at Rs 1,065-1,119 per share. At the upper end of the band, the issue is expected to raise more than Rs 30,000 crore, offering investors an opportunity to invest directly in Reliance Industries’ telecom and digital business.

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Jio IPO puts telecom valuations in focus

The listing will establish a standalone market valuation for Jio Platforms, which is currently part of Reliance Industries. This could also provide investors with a new benchmark to assess valuations across the telecom sector, including Bharti Airtel.

Nomura estimates the IPO will value Jio's equity at Rs 9.8 lakh crore to Rs 10.3 lakh crore. Including net debt, spectrum liabilities and lease liabilities, its estimated enterprise value comes to Rs 10.9 lakh crore to Rs 11.4 lakh crore.

For Reliance, the listing will also put a market value on its 66.4% stake in Jio. Nomura estimates the stake would be worth Rs 481-506 per Reliance share before a holding company discount. With a 20% discount, that comes down to Rs 385-405 per share.

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Airtel gets a fresh valuation comparison

The Jio listing will bring the valuations of India’s two largest private telecom operators into sharper focus.

Nomura estimates Bharti Airtel's India telecom business is valued at 9.2 times FY28 EV/EBITDA, against 10.5-10.9 times for Jio at the proposed IPO valuation. The brokerage said Bharti's discount to Jio is unjustified.

Nomura expects Bharti to be better placed for the next tariff increase because of its higher share of premium subscribers. The difference was visible during the July 2024 tariff hike. Bharti's ARPU rose by Rs 34 over the following three quarters, compared with Rs 25 for Jio. Bharti also added 2% subscribers during the period, while Jio lost 0.3%.

Nomura expects tariff hikes to become an important earnings driver for Jio after its listing, as the period of easy subscriber gains starts to fade. For the wider telecom sector, the IPO comes at a time when investors are also watching subscriber growth, tariffs and earnings more closely.