Reliance Jio, Reliance Retail IPO unlikely in 2023

In a recent note, JP Morgan Chase highlighted that Reliance Industries was unlikely to launch the IPOs of Reliance Jio and Reliance Retail in 2023. In the 2019 AGM, Mukesh Ambani had committed to list the shares of Reliance Jio and Reliance Retail within 5 years. However, in 2020, Reliance got a slew of global investors including Facebook and Google to invest in Reliance Jio. JP Morgan expects the listing of Jio Financial Services to happen earlier, which could be a short term trigger for the stock. 

JP Morgan believes Reliance will not undertake the IPOs of Reliance Jio and Reliance Retail this year due to some of its key businesses being in the midst of a mini-capex cycle. Petchem is seeing additional capex happening. Reliance Jio business is investing heavily in the roll-out and technology ecosystem for 5G in India, which will only be completed by early 2024. The cream of the capex outlays in the coming quarters would be on emerging new age businesses like green energy, green hydrogen, EV ecosystems etc.

JP Morgan is of the view that being in the middle of a mini capex cycle, Reliance may wait for some more time before monetizing its value in Reliance Jio and Reliance Retail. RIL may be inclined to believe that this is not the right time to get the optimal valuations for both companies. However, the wait may not be too long. There are concerns that the net debt (gross debt – cash equivalents) of Reliance has gone up from zero to Rs 1.10 trillion. However, this is largely on account of deferred payment liabilities post the spectrum acquisition by Jio. The underlying borrowings are still way below the FY2020 levels.