The two mega initial public offerings coming up in India are joined at the hip by retail sentiment. The $7 billion question is if the glue will hold.
If gray-market prices are to be believed, both the National Stock Exchange of India Ltd.’s $3 billion IPO and a $4 billion debut of billionaire Mukesh Ambani’s telecom and digital media empire are likely to find keen interest among local investors desperate for some excitement, the kind that secondary markets have been failing to provide lately.(1)
While global capital chased the AI semiconductor booms in Taipei and Seoul — tripling Korean stocks and doubling Taiwanese equities — the benchmark Indian index hasn’t gone anywhere in the past two years. Worse, the war in Iran has torn a hole in the energy-importing nation’s fragile balance of payments. A plunge in the rupee has scared away foreign capital.
But now that the US and Iran have at least started peace talks, all eyes are on India’s individual stock buyers. They have only recently started to return after beating a retreat from markets. The common investing public needs to get its mojo back, and that’s where both the similarities and the differences between the two IPOs become important.
Both the NSE, India’s largest exchange, and Ambani’s Jio Platforms Ltd. have attractive moats: They are dominant players in what are effectively duopolistic industries, too heavily regulated for new competition to break in. The NSE’s rival is the 151-year-old BSE Ltd., or the erstwhile Bombay Stock Exchange, which has just a 7% share of the overall cash-equity turnover. Jio’s 500 million-plus subscribers — and a media empire buttressed by a lock on cricket, a national craze — put it considerably ahead of Bharti Airtel Ltd., the nearest challenger.
Indian investors are intimately familiar with both franchises. As long as India has capital controls, local market participants are beholden to the NSE for wealth creation. In mobile wireless, it’s hard to imagine anyone other than Jio deciding the price of data. Even in newer technologies like satellite broadband, national-security concerns may give Ambani an advantage over Elon Musk’s Starlink or Jeff Bezos’ Amazon.
But the differences in the two IPOs are crucial, too. The NSE listing, long delayed by governance scandals at the bourse, is entirely a sale of stock by existing shareholders. Jio, however, will be raising new money, partly to retire nearly $3 billion in debt.
In mature markets, the distinction between an offer-for-sale and a fresh capital raise is mere plumbing. In India’s current fragile environment, it’s anything but. Because the NSE listing is structured strictly as an offer-for-sale, no fresh cash will enter the bourse’s treasury. Worse, among those trimming their stakes are foreign giants like Morgan Stanley and Temasek Holdings Pte. At a time when New Delhi is aggressively wooing diaspora dollars to shore up a fraying rupee, the NSE IPO risks becoming an exit ramp for foreign capital.
Ambani’s Jio, conversely, is a magnet for fresh funds. For Jio to succeed, however, the NSE sellers — Indian banks and insurers, foreign institutions, ultra-rich private investors — must leave some money on the table. (Given that the NSE rushed its draft papers to the regulator a day ahead of Jio, the general expectation is that it may be first out the door.) If they overprice the offer and burn retail investors, the flames won’t just singe Ambani; they will also reach Silicon Valley, upsetting everyone from Sundar Pichai to Mark Zuckerberg.
Alphabet Inc. and Meta Platforms Inc. are big backers of Jio, as are Saudi Arabia’s Public Investment Fund, KKR & Co. and a number of other sovereign wealth funds and private-equity firms. Although none of them are selling in the IPO, they will get to record the gains in their books. For Google alone, that turns a $4.5 billion stake bought six years ago into a $10 billion asset — more if the shares keep rising after listing.
Jio’s success will also help Ambani’s flagship Reliance Industries Ltd. clear the deck for its next big public float: consumer commerce. Carving out India’s largest retailer will still take some work because the competitive intensity in grocery, fashion and electronics sales is much higher than in telecom. All the more reason to keep retail shareholders happy.
This report is auto generated from the Bloomberg news service. ThePrint holds no responsibility for its content.