The buzz around the much awaited IPO of Reliance Jio has intensified in the market. Jio Platforms Limited (JPL) has submitted its draft papers (DRHP) with the market regulator SEBI. A very shocking figure has emerged from this draft. Mahendra Nahta, Founder and Managing Director of HFCL, has made a huge profit of 11,983 percent on his initial investment. Nahta had bought stake in Jio at a price of only Rs 10 per share, whose value is now around Rs 5,800 crore. Under this IPO, the company will not sell any old shares (there is no OFS), but will raise capital by directly issuing new shares. At present, no existing investor including Nahta is selling his stake.
Investment of Rs 47 crore turned into wealth worth Rs 5800 crore
Market leading brokerage house Motilal Oswal has estimated the total equity value of Jio Platforms at Rs 10.7 lakh crore. Based on this valuation, Mahendra Nahta’s 0.54% stake is now worth around Rs 5,800 crore. This situation did not happen overnight. On July 7, 2020, eight months after Jio Platforms came into existence, the Nahta family had acquired these shares in two tranches. The Nahta family (comprising his son Anant and daughter Priyanka) acquired 37.04 million shares by converting debentures at Rs 10 per share. Along with this, Reliance allotted him additional 10.83 million shares. His total cost in this entire deal was only Rs 47.87 crore, which has increased 121 times today.
Shares sold at throwaway prices compared to foreign giants
The most interesting thing about this deal is the price of shares. The day the Nahta family got stake in Jio at Rs 10 per share, the world’s leading tech companies had invested at a very high price. Reliance allotted shares to Meta (Facebook) at a price of Rs 488.34 per share. Apart from this, 13 big global investors like Google, KKR, Mubadala and TPG together invested Rs 1,52,056 crore to buy 33% share of the company. Most of these investors paid Rs 549.31 per share. That is, compared to the huge price paid by the world’s largest institutional investors, the entry price of the Nahata family was negligible.
The profit script was written a decade ago
The story of this historic profit had started in the year 2010 itself. On June 11, 2010, Mahendra Nahta’s company ‘Infotel Broadband Services’ won the telecom spectrum for entire India for Rs 12,872 crore. Hours later, Reliance Industries bought 95% stake in Infotel Broadband for Rs 4,800 crore. Nahta was left with only 5% share. Reliance later paid the full price for the spectrum that Infotel had won. This 5% stake later became the foundation of Jio Platforms, which has today transformed this investment into a huge mountain of profits.
Use of funds raised from IPO
Jio has also made clear the blueprint for the use of the funds raised from this new IPO. The company will use Rs 27,500 crore raised from this issue to repay the debt of its main telecom subsidiary, Reliance Jio Infocomm. The remaining amount will be spent on general corporate needs. If we look at the current shareholding pattern of the company, Reliance Industries has strong control with 66.43% stake. Among external investors, Meta is the largest shareholder with 9.98% (892.3 million shares), followed by Google with 7.73%.
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