Jio jumps 27% on debut to Airtel’s earnings multiple as IPO cash repays loans

Jio Platforms closed at Rs1,417.50 on debut, 42 times last year's earnings. Bharti Airtel trades at 43.9 times and earns more than twice Jio's return on net worth.

The market paid Bharti Airtel's multiple for Jio Platforms, a business earning less than half Airtel's return, and the IPO cash does not change that. Rs275bn of the Rs297.2bn net proceeds prepays dollar and yen loans. Rs1,166.8bn of spectrum and lease claims stay on the balance sheet.

In April 2027, up to 3.0 billion locked in shares, a third of the company, become available to trade. A price above the Rs1,119 issue price through that window means institutions accept Airtel's multiple for half Airtel's return. A close below Rs1,119 erases the day one premium.

Jio opened 21% above its issue price on 28 October and closed 27% higher at Rs1,417.50, according to NSE data. That values the company at Rs13.05 trillion, about $137bn. At the issue price it was worth Rs10.30 trillion.

Diluted earnings per share of Rs33.59 for the year to March put Jio's close at about 42 times earnings. Airtel stood at 43.9 at the same close. The 42 uses shares in issue before the offer. The new shares add about 3% to the count, so the multiple on the enlarged capital is a little higher.

Jio earns 9.4% on net worth and Airtel 20.3%, according to the prospectus filed with SEBI, the Indian regulator. Net debt is only 0.03 times equity, so that low return comes from an almost unlevered balance sheet. The price therefore bets on what Jio wants to become, a platform for AI, cloud and enterprise services.

Where the IPO proceeds go

The share issue cleans up the balance sheet. All 270 million shares are new, so no existing holder sold. The full Rs301.9bn at Rs1,119 a share goes to the company.

Rs275bn of the Rs297.2bn left after issue costs prepays three syndicated dollar and yen loans of Reliance Jio Infocomm, the telecom subsidiary. The loans fall due between March and June 2028 and can be repaid early without penalty. The prospectus lists US$676m plus JPY44,923m due on 26 June 2028, and US$1,200m plus JPY41,814m due on 1 and 20 June 2028. The third loan is US$750m.

Rs22.2bn is earmarked for general corporate purposes. The prospectus says the prepayment supports 5G densification, AI and cloud services. The cash goes to lenders.

Jio did not need the money for capex. Cash capex has fallen 36% in two years, to Rs341.8bn from Rs535.1bn. Operating cash flow in the year to March was Rs775.6bn.

Free cash after leases, interest and spectrum instalments was Rs203.3bn. That is operating cash less capex of 341.8, leases of 60.6, interest of 122.4 and spectrum instalments of 47.4, in rupee billions. The Rs301.9bn raised equals about 1.5 years of that cash.

What the debt figures leave out

Net debt on the prospectus definition is Rs95.4bn at 30 June. That is borrowings of Rs613.7bn less cash and marketable securities of Rs518.3bn. The 0.36 times net leverage the company quotes is the March figure: net debt of Rs275.8bn over full year EBITDA of Rs762.6bn.

Net debt leaves out Rs1,045.1bn of deferred spectrum payments, owed for airwaves Jio has already bought. It also leaves out Rs121.7bn of leases. Counting both, claims net of cash were Rs1,262.2bn before the issue and Rs965.0bn after it.

The loans being repaid, Rs275bn, are smaller than the Rs1,045bn of spectrum payments. The spectrum bill runs at roughly Rs50bn a year, and the IPO does not change it. Market value plus those claims gives an enterprise value of Rs14.0 trillion. That is 17.7 times EBITDA (earnings before interest, tax, depreciation and amortisation) for the last twelve months.

The case for a higher valuation

Jio has a case for a premium to its older rival. Its EBITDA margin was 51.9% in the year to March and 53.3% in the June quarter. Profit after tax for the year was Rs300.5bn. Revenue grew 15.8% a year over fiscal 2024 to 2026 and rose 11.8% in the June quarter.

Customers and revenue per user are also rising. Jio has 533.3 million customers, 284.9 million of them on 5G. Revenue per user rose from Rs181.7 a month in the March 2024 quarter to Rs215.6 in the June 2026 quarter.

Earnings may understate the business because capex is falling. June quarter cash capex was Rs41.8bn against Rs120.5bn a year earlier, and last year's Rs342bn sets the line. The premium holds only if capex stays below it. The stated uses of the proceeds, 5G densification, AI and cloud, point to spending that resumes. The spectrum instalments continue regardless.

Demand was strong where it counted. The NSE bid book on 23 October showed total demand of 12.45 times the shares offered on the exchange, excluding the anchor portion. Qualified institutional buyers bid 37.22 times their portion and retail investors 1.71 times. Institutions bid 37 times on a fresh issue priced at a peer multiple on day one.

Anchor demand topped $25bn, according to the Reuters report on the debut. Thirteen investors paid for about 33% of Jio in 2020 at a valuation of $57bn to $65bn. The company is now priced at $137bn.

The remaining liabilities are the trade-off. The dollar and yen debt goes, and the Rs1 trillion spectrum liability remains. On the prospectus definition, net debt falls from Rs95.4bn to net cash of about Rs202bn, which is 95.4 less 297.2. Rs1,166.8bn of spectrum and lease claims remain.

When locked in shares can trade

Ownership barely moves. Reliance Industries, the promoter, keeps 64.41% after the issue. Meta's affiliate Jaadhu Holdings holds 9.68% and Google International 7.49%.

Non promoter holders own 3.0 billion pre issue shares, 32.6% of the post issue capital and Rs4.25 trillion at the close. Their lock in runs for six months from allotment, which ends in April 2027. Meta and Google hold 1.58 billion of them. That is 52.6% of the block, 17.2% of the company and Rs2.24 trillion at the close.

Half of the anchor investors' shares become tradable 30 days after allotment, in November 2026. The rest follow after 90 days, in January 2027.

By April 2027 anchor shares are tradable and the lock in ends. A price above Rs1,119 through that window confirms the Airtel multiple. A close below it turns the argument to the Rs1 trillion of spectrum payments the proceeds did not touch.