Hello, I am Priyanka Salve, writing to you from Singapore.
Welcome to the latest issue of “Inside India” – where you can find news and updates on the fastest-growing large economies around the world.
Indian billionaire Mukesh Ambani (Mukesh Ambani) was criticized last week by Elon Musk (Elon Musk) for planning to launch a satellite communication business and gain dominance in India's telecommunications market. However, he now has more pressing concerns.
Jio Platforms is preparing to launch a record-breaking IPO very soon, yet the market's reaction to its valuation expectations is not positive. Investors seem to doubt the company's positioning as a technology enterprise.
Any thoughts on today's briefing? Feel free to share them with the team.
Top News
The telecommunications and digital services business Jio Platforms owned by Indian billionaire Mukesh Ambani was referred to as a “monopolistic” enterprise by Starlink founder Elon Musk last week. The company has already downgraded its valuation before next IPO.
Jio Platforms is India's largest telecommunications operator, with over 500,000 subscribers. However, according to experts interviewed by CNBC, the company has been trying to position itself as a technology company, rather than just a traditional utility provider; nevertheless, experts have differing opinions on whether this positioning is reasonable.
On Wednesday, Reliance Industries stated in a stock document that Jio Platforms's IPO will raise up to 302 billion rupees (approximately $3.2 billion), with an issue price range of 1065 rupees to 1119 rupees per share. This means the company's valuation is about $108 billion, which is lower than the valuation of over $13 billion that was reported a year ago.
In a report on Sunday, global brokerage firm Nomura stated that the enterprise valuation of Jio has been reduced from the previously expected $133 billion to $118 billion. The report is based on the pricing details of IPO disclosed by Bloomberg News last week.
The parent company of Jio Platforms, Reliance Industries, did not respond to the email in which CNBC sought comments.
Calculated based on a equity valuation of $108 billion, the valuation of Jio is lower than that of India's second-largest telecommunications company, Bharti Airtel; LSEG data shows that Bharti Airtel currently has a market value of over $117 billion.
The report states: "After going public, Jio may need to prove its growth capability to the public shareholders." The report also adds that the era of easily acquiring subscriber growth is coming to an end, and price increases are likely to become the "main driver of profit growth."
According to the information disclosed in the Jio Platforms IPO document, the company's average revenue per user (ARPU) is 214 rupees (2.25 US dollars) per month, while its competitor Airtel earns 257 rupees from its mobile services (ARPU), 527 rupees from its home internet services, and 158 rupees from its digital television services.
If we only look at the key indicators of telecommunications companies – average revenue per user, the discount of Jio relative to Airtel seems reasonable. However, Jio hopes to be perceived as a technology company, rather than just a public utility enterprise.
Tech companies or telecom companies?
Partners Counterpoint Research and Neil Shah stated that through this IPO, Jio Platforms plans to settle its historical telecommunications debts, which will free up internal cash flow for use in the second phase of growth.
According to the IPO document, Jio plans to use the funds raised this time to repay its telecom business debt of 275 billion rupees.
Shah stated that the next phase of investment will include funding for the company's 'gigawatt-level green AI infrastructure' and low-earth orbit satellite networks, which brings it into the category of technology companies.
He pointed out that global technology giants such as Meta and Google hold nearly 10% and 8% of the shares in Jio respectively, and will not withdraw their investment through this IPO – which indicates that they are willing to wait for the next phase of growth.
At the company's annual general meeting in June, Ambani told shareholders that Jio will "prove to the world that India is capable of creating technology companies with global scale, global capabilities, and global value."
He emphasized that according to data from the World Intellectual Property Organization, Jio Platforms has risen from 340th place a year ago to 20th place in terms of "the speed of innovation reflected through patents."
It was at that time that Ambani announced that the Jio Platforms project would enter the Indian satellite communications sector, which also caught the interest of Starlink under Musk. Last week, Musk stated that his company had spent “five years complying with every law and requirement of the government” and blamed Ambani for the delayed launch of Starlink in India.
However, despite the world's first trillionaire and India's second-richest person competing for the opportunity to provide internet services to remote areas of India, some experts still do not believe that Jio Platforms is sufficient to be defined as a technology company.
The managing partner and founder of Ansid Capital in the United States, Anurag Singh, told CNBC that Jio Platforms wants a valuation for the tech company, but currently “lacks product expertise”.
He added that Indian investors might buy into the tech narrative of Jio out of lack of other options, "but global investors will not." Singh indicates that, for now, Reliance is still a utility company and requires substantial investment to transform into a tech enterprise.
You also need to know
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- India calls J.D Vance's remarks on immigration "highly offensive"
- India's inflation rate rose to 5.54% in September, higher than expected.
- Indian billionaires who invested in Trump's refinery project are also buying more Venezuelan crude oil
Next
- October 15: India's September unemployment data
- October 21: Jio Platforms IPO is activated.
