The mother of all IPOs, expected in the first half of 2026, has sparked concerns that billionaire Mukesh Ambani‘s conglomerate could face a holding company discount once investors gain the option to buy Jio separately. Reliance shares have already tumbled 12% so far in calendar year 2026 as the listing nears, with the company awaiting final government notification on revised IPO norms before filing its draft red herring prospectus (DRHP).
But CLSA analyst Vikash Kumar Jain dismissed those fears as overdone, arguing that Jio’s minuscule 2.5% starting free float could create liquidity constraints that force the stock to trade at a premium to peers, potentially offsetting any holding company discount.
“Examples of subsidiary stocks with low free floats like Hindustan Zinc end up trading at a notable premium to peers and such a premium may negate any hit due to a holdco discount,” Jain wrote in a note, maintaining an outperform recommendation with a target price of Rs1,800.
Investment banks have pegged Jio Platforms’ valuation at around $180 billion. At that level, offloading just 2.5%, the minimum threshold under the Securities and Exchange Board of India’s new framework for companies valued above Rs5 lakh crore, would raise about $4.5 billion, according to Jefferies estimates from November.
The offering is likely to be split evenly between primary issuance and secondary share sales, with private equity investors including KKR, TPG, Silver Lake and Vista Partners preparing to trim their holdings. Strategic shareholders Google, which owns 7.75%, and Meta, with 9.99%, are expected to retain their stakes, while Intel may consider a partial sell-down of its modest 0.7% holding, according to reports.
Jio Platforms has narrowed down to Morgan Stanley and Goldman Sachs as lead bankers for the offering and is ready to file its DRHP once the government issues a notification clearing Sebi’s proposal to allow a 2.5% public float for mega IPOs.Jain noted that about 18% of Jio is held by strategic shareholders, another 5% by sovereign wealth funds, and 9% by private equity players. He argued the effective lack of liquidity could push Jio’s valuation to a notable premium based on fair value, pointing to Hindustan Zinc, which trades at a significant premium to peers with an effective free float of just 6.9%.
“We concede an IPO would open the option to gain exposure to Jio separately and this may raise the risk of a holdco discount on value of Reliance’s 67% stake in Jio,” Jain said. However, he added that improved confidence in Reliance’s FMCG, digital OTT and AI ventures, as well as the ramp-up of new energy and quick commerce businesses, are tailwinds for its sum-of-the-parts value.
Sensex, Nifty today: Catch all the LIVE stock market action here
The spectrum of Jio Platforms’ valuation remains notably wide among brokerages. Jefferies recently upgraded its enterprise valuation estimate to $180 billion after third-quarter earnings, while Motilal Oswal Financial Services pegged it at $148 billion, IIFL at $133 billion, and Kotak Institutional Equities at Rs11.59 lakh crore.
JP Morgan’s Sanjay Mookim highlighted that Reliance’s new energy projects, spanning polysilicon to module production plus battery manufacturing, are likely to be commissioned soon, with installed modules expected to begin generating power in calendar year 2026. “As installations ramp up, potential EBITDA can be significant – but will require material capex,” Mookim said, maintaining an overweight rating with a target price of Rs1,675.
JM Financial said the recent correction in Reliance shares was overdone, identifying Jio’s IPO and a likely telecom tariff hike following the listing as key near-term triggers. The brokerage expects Reliance’s net debt to decline gradually as capital expenditure moderates to Rs1.2-1.4 lakh crore annually from Rs2.3 lakh crore in fiscal 2023, with spending fully funded by increasing internal cash generation.
Reliance has guided that it will keep reported net debt-to-EBITDA below 1 times, versus 0.6 times at end of third quarter fiscal 2026, providing comfort to investors, JM Financial noted.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)