Mark Zuckerberg-led Facebook’s multi-billion dollar investment in Reliance Jio has catapulted India’s largest telecom company to the top-five league in market capitalisation. The gargantuan all-cash investment of Rs 43,500 crore is a vindication of Mukesh Ambani’s big bet on Jio not as a telecom company but as a tech and platform player.
A slew of brokerages gave a thumbs up to the landmark transaction after the official announcement. According to Jefferies, the deal reflects a turnaround of the telecom sector and implies the doubling of Jio’s earnings before interest, taxes, depreciation and amortisation (EBITDA) from current levels. Credit Suisse said Facebook’s investment would accelerate Jio’s digital monetisation drive. On the other hand, the social networking giant gets access to 400 million Jio customers, a segment which will grow over time. This will enable Facebook’s Whatsapp to provide value-added services and new products in the days to come. But for now, the spotlight is back on the firm’s much-awaited big-bang IPO.
“ With Facebook picking up a minority stake, the Reliance management has fulfilled their own condition of inducting a global investor in Jio. This paves the way for an IPO in the next 12 months, preferably in FY21 with a stake dilution of about 10 percent,” says market veteran SP Tulsian.
“It’s like getting a pre-IPO investor and benchmarking the valuation and then targeting an IPO later when the business is on the rise," said a merchant banker.
Other capital market advisors are betting on a FY22 listing.
The deal may bolster Jio’s listing plans as the firm now has a credible global tech giant as an investor, says a capital markets lawyer. “Reliance will have to wait for one year for Facebook to become eligible for an offer for sale. An IPO in FY 22 looks doable,” he added.
"During this year, it is expected that the regulator and the courts will be busy, leading to pricing adjustments. Tariff rise by the existing players cannot be ruled out and therefore FY22 is a clearer year for an IPO in the telecom sector,” added another merchant banker.
An executive familiar with Reliance Jio said the firm is looking at coming out with an initial public offer in the medium term, in the next few years, adding that both Reliance and Facebook share the similar vision of creating a digital ecosystem in India.
Catch our entire coverage on the Facebook-Jio Deal here.Disclaimer: Reliance Industries Ltd., which also owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.