Why Reliance Jio can rise five times above its $64 billion private market valuation? – The Property Chronicle
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Why Reliance Jio can rise five times above its $64 billion private market valuation?

The Macro View

Last week witnessed a feeding frenzy from the crème de la crème of Wall Street’s smart money (and some Dubai’s smart money LOL!) to be part of the private market financing of Reliance Jio, the emerging supernova of India’s digital ecosystem.

After having spent $50 billion in building a scalable, state of the art wireless network, Mukesh Ambani realized that he needed strategic investors like Facebook, Google and Qualcomm to build a unique ecosystem of content, services, apps and platforms. In my opinion Mukesh Ambani will go down in history in the same league of seismic socio-economic transformational agents in Indian history as Lord Buddha, Emperor Akbar, Robert Clive, M. K. Gandhi and JRD Tata.

Reliance has focused on the hottest embryonic themes in India’s digital constellation – IOT, blockchain, edge computing, mobile wallets, payment networks, AR/virtual reality, education, healthcare, retail, media/entertainment, music streaming, Nextgen e-commerce, e-Bollywood, gaming and so much more.

In India, a nation of 1.3 billion human beings will have no choice but to access this digital octopus, a defacto economic monopoly since Vodafone, Bharti Airtel have no hope of ever competing with Reliance Jio, I can easily envisage a $150 billion market cap on the NASDAQ in the next two years. This means that investors who accumulated the shares at $64 billion in last week’s financing round will almost triple their money when the IPO breaks syndicate some time in 2022. It is no coincidence that the private equity financiers who led the round included KKR, General Atalantic, Vista and Silverlake, among the most respected names in technology finance.

The digital transformation of India will be one of the worlds’ most exciting themes in the next decade and Reliance Jio is the obvious Proxy for this theme. This is why I believe the Reliance Jio IPO will be a historic moment in the Big Tech sector, in the same league as the fabulously profitable IPOs of Microsoft, Amazon, Google and Alibaba. Hence the reason I went gaga on this investment opportunity, even though so many of my Indian friends are skeptical about private equity deals in Bharat Mata, given their bitter past experience. Yet comparing Reliance Jio to any other dodgy Indian stock promoter is like comparing the Kohinoor diamond (Yo, Queen Liz, we want it back. The House of Windsor should not hoard goods stolen from Maharaja Ranjit Singh’s teenage son way back when) to a lump of worthless coal.

Note that Reliance Industries shares have doubled since March to almost 1950 rupees on the Bombay Stock Exchange even though India has crossed one million COVID cases and Moody’s has downgraded India’s sovereign credit rating to Baa3, one notch above sovereign junk.

Mukesh Ambani believes that Reliance Jio is a potential $1 trillion business as India’s preeminent digital services champion and I do not believe he is smoking anything weird in his philosopher’s pipe. He built India’s biggest wireless network in only 3 years even though Dalal Street scoffed at his debt accumulation spree and digital fantasies. This is the reason Reliance Industries shares were dead money earlier in the decade.

Jio’s network infrastructure is both scalable and resilient. Its architecture will enable a dramatic drop in operating cost and an exponential rise in wireless broadband data usage. At $64 billion, I believe that Jio has given a gift to Wall Street since downside risk is near zero while upside potential is at least a five bagger. It is not often in life that an investor gets a chance to invest in a unique digital business with zero downside risk and five to ten times upside potential. I remember recommending Google and Tesla at their respective IPOs in my media columns and I am even more bullish in the long term prospects of Jio. Lest I be accused of home country bias, let me disclose, I would like to point out that I was born on the other side of Sir Cyril Radcliffe’s award that partition the subcontinent.

India will soon become a tale of two Modis – While Narendra has destroyed billions in economic value, Manoj will create hundreds of billions in shareholder value.

The Macro View

About Matein Khalid

Matein Khalid

Matein Khalid is Chief Investment Officer of Asas Capital in the DIFC; he is responsible for global investment strategy and the development of the multi family office platform. He has worked in Wall Street money centre banks, securities firms and hedge funds in New York, London, Chicago and Geneva. In addition, he has been an advisor for royal investment offices in the Gulf for 8 years. Mr Khalid has four degrees in finance, economics, banking and international relations from the Wharton School, University of Pennsylvania. He is a director at the American College of Dubai and has taught MBA level courses in commercial/investment banking at the American University of Sharjah and British University of Dubai. He writes the Global Investing columns for Khaleej Times, Gulf Business and Oman Economic Review.

Articles by Matein Khalid

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