Easing of IPO rules likely to pave way for a Reliance Jio listing: Citi
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Mumbai: Citi said the Securities and Exchange Board of India 's proposal to ease minimum public offer rules for mega Initial Public Offerings (IPOs) could remove a key hurdle for Reliance Jio 's listing.According to the regulator, companies with a post-issue market capitalisation above ₹5 trillion (₹5 lakh crore) would only need to float at least 2.5% of shares, instead of the current 5% requirement.For Jio Platforms, valued by Citi at about $135 billion (₹11.7 lakh crore) in enterprise value with equity worth over $120 billion (₹10.4 lakh crore) - a lower threshold would halve the offer size to over $3 billion, compared with $6 billion under existing rules, the brokerage said."A 5% public offer would amount to $6 billion+ of share supply, which is fairly large for the Indian market to absorb, especially as 35% is reserved for retail investors," said Citi's Saurabh Handa and Prerna Goenka in the note. "A 2.5% public offer for Jio would amount to $3 billion+ of share supply, which we believe not only reduces the supply overhang at the time of the IPO but could also limit hold-company discount concerns for RIL."Citi reiterated Buy rating on Reliance with a target of ₹1,690, implying an upside of 19% from Tuesday's close of ₹1,420. The stock gained 2.8%. Citi said RIL's annual general meeting on August 29 is expected to draw investor focus on any update on Jio's listing in the wake of the regulatory proposals.Sebi's plan is aimed at preventing large stake sales risk flooding the market and depressing prices despite strong prospects.Under Sebi's proposals for easing IPO norms for large issuers, companies with post-issue market cap above ₹50,000 crore would need to sell only 8% against 10% now, while those above ₹1 lakh crore and ₹5 lakh crore would dilute 2.75% and 2.5%, compared with 5% earlier.The timeline to meet the 25% minimum public shareholding would be extended - up to five years for firms with a post IPO market cap of above ₹50,000 crore and up to 10 years for those above ₹1 lakh crore.
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