Our investment view

 

Strong business fundamentals with limited valuation comfort

 

Jio offers exposure to a leading connectivity franchise with recurring revenue, substantial scale and improving cash generation. We are constructive on its long-term business prospects. At the indicated upper offer price, however, investors are paying a premium that already assumes continued growth in customer spending and stronger cash returns.

 

 

Use of proceeds

 

Approximately ₹27,500 crore is intended to repay borrowings at Reliance Jio Infocomm, the telecom subsidiary. Debt repayment should reduce financing costs and strengthen the balance sheet. The proposed offer raises fresh capital for the business; existing shareholders are not selling through this issue.

 

The business and its growth drivers

 

Jio’s competitive advantage rests on a nationwide network, distribution reach and a customer base that would be difficult for a new entrant to replicate. As of June 2026, the business served approximately 53.33 crore customers, including 28.49 crore 5G users. Average monthly revenue per user was ₹215.6. Mobile connectivity provides the recurring earnings base. JioFiber and JioAirFiber extend the opportunity into home broadband, while enterprise connectivity, cloud services and digital applications offer additional avenues for growth.

The current earnings mix matters. Reliance Jio Infocomm accounted for nearly 88% of FY26 consolidated revenue and 95% of EBITDA. Telecom therefore remains the foundation of the investment case. AI and cloud services offer potential upside, but their valuation should depend on evidence of commercial profitability

 

Where the next phase of growth can come from

 

Higher customer spending is likely to become more important as the subscriber base matures. Tariff increases, migration to higher-value plans, broadband adoption and better use of existing network capacity can support earnings. Execution will depend on customer affordability, competitive behaviour and disciplined investment

 

Financial performance

 

Consolidated figures in ₹ crore unless stated otherwise. Financial years end in March.

 

Between FY24 and FY26, revenue grew at approximately 15.8% a year, EBITDA at 17.8% and net profit at 18.4%. Margins above 50% show the operating leverage of a network business at scale.

 

Cash generation is improving but capital efficiency needs attention

 

Cash capital expenditure declined from approximately ₹53,510 crore in FY24 to ₹34,184 crore in FY26 as operating cash flow increased. This points to better cash availability after the intensive network rollout. Future spectrum payments, broadband expansion and technology upgrades can still require substantial spending.

Return on capital employed fell to 10.76% in FY26 from 12.83% in FY24. For shareholders, the next test is whether rising profits translate into higher returns on the capital invested.

 

Valuation and the peer perspective

 

At ₹1,119 per share, the indicated post-issue equity valuation is approximately ₹10.31 lakh crore. The pricing assumes that Jio can keep increasing customer revenue, preserve margins and convert more operating profit into cash.

 

These are demanding multiples for a capital-intensive business. Strong results alone may not deliver strong share-price returns if those results are already reflected in the entry valuation.

 

How to think about Bharti Airtel

 

Airtel is a useful operating benchmark. Jio has greater Indian subscriber scale; Airtel has stronger customer monetisation and geographic diversification through Africa. A fair valuation comparison requires the same forecast period and consistent treatment of debt, leases and spectrum liabilities.

A premium for Jio would need support from faster sustainable growth and improving cash returns. We would give limited weight to an AI or technology-platform premium until those businesses contribute meaningful profits. Our assessment is that the indicated IPO pricing is fair to full rather than clearly undervalued

 

 

What needs to be monitored after listing

 

 

Our conclusion

Jio is a credible long-term investment candidate, supported by a large customer franchise, recurring revenue and improving operating cash generation. Its scale and infrastructure provide substantial competitive strengths.

The entry price is the constraint. At roughly 34 times FY26 earnings, the offer leaves limited room for disappointment in tariffs, capital efficiency or investment spending. We remain positive on the business and cautious on valuation.

For investors considering participation, a 3–5 year horizon and tolerance for post-listing volatility are essential. Subscription should follow an assessment of existing telecom exposure and portfolio suitability. Investors seeking a clear margin of safety can wait for a more attractive valuation or further evidence of improving returns on capital.

 

Arijeet Dutta

Research Analyst || Alpha Capital

 

Disclaimer

This note is provided by Alpha Capital for general information and discussion. It is not a personalised investment recommendation, an offer or solicitation to buy or sell securities, or an assurance of returns. Information is drawn from sources believed to be reliable, but accuracy and completeness are not guaranteed. Views and estimates may change without notice. Investors should read the final prospectus, risk factors and issue terms, and consider their objectives, financial position and risk tolerance before investing. IPO investments involve market, business and liquidity risks; listing gains and protection of principal are not assured. Past performance does not indicate future returns. Seek appropriate professional advice where required. This document is confidential and intended for the recipient’s use.