Scope for another 8 pc stake sale in Jio after Silver Lake deal

BofA Research said in a note, "After today's 1.15 per cent stake, we see room for further 8 per cent stake sale in line with mgmt commentary (timing unknown)".

"Post Facebook due-diligence, we believe any further due diligence by PEs on Jio Platforms could be faster as the documents and process have been organised for the recent investments. We would expect any incremental cash coming into Jio to fortify its balancesheet, particularly to renew its 850 MHz spectrum and acquire new 5G spectrum in the future. We see room for Jio to have a first mover advantage in 5G," it said.

The Reliance Industries Limited (RIL) in its 4Q results stated that it has received interest from global investors for a 10 per cent stake in Jio Platforms (it sold a 9.99 per cent stake to Facebook at $61 billion).

On Monday, RIL announced that Silver Lake, a PE (private equity) firm, will invest Rs 56 billion ($750 million) into Jio Platforms. This investment at $65 billion is at 12.5 per cent premium to the equity valuation of the Facebook investment.

"We find the premium justified as unlike FB, a strategic investor which brings value to the table, a PE firm could be viewed largely as a financial investor," BofA said.

The research report said that further stake sales could help liquidity before any Jio IPO. RIL in its August 2019 AGM had stated it was looking at a Jio IPO within five years.

The implied free float required to be issued under the Indian law would be $16-17 billion, using the last deal valuation of $65 billion and the $66 billion valuation estimate by getting financial investors who could own additional 10 per cent of company, RIL could reduce dependence on a future IPO for major cash infusions as the company may be able to get cash from financial investors in the interim (which may help for upcoming auctions), the report said.

On leveraging the WhatsApp relationship, the Jefferies Group said in a note that Reliance Retail's partnership with WhatsApp holds promise for RRL's new commerce platform, JioMart.

The pilot, launched in some geographies last year, now extends to Mumbai. "Our interactions with retailers suggest the model is still evolving. We see the grocery opportunity as huge and own-label introduction as the next logical step," the report said.

RRL's success could alter the industry dynamics structurally but execution holds the key and there are challenges. With a presence of more than 11,700 outlets, RRL leads the Indian organised retail space and is the fastest-growing retailer in the world.

"Although it has a broad-based presence, grocery contributes more than 20 per cent to the reported revenues and FY20 revenues nearly doubled year on year. RRL has now set its eyes on the unorganised grocery retail market under 'New Commerce' where it connects merchants on an uniform technology platform," the report said.