BENGALURU, Oct 12 - Mukesh Ambani is stuck between a rock and a hard place. Jio Platforms, the telecom unit within his energy-to-retail conglomerate Reliance Industries may only scrape a $102 billion valuation for its IPO, based on the low end of a price range for shares reported by Reuters. It's a bad time to do a deal as war risks roil markets and technology euphoria fades. But any further delay risks denting the Indian tycoon’s credibility.

That valuation reflects a disappointment on two fronts. Ambani and his son, Akash Ambani, who is leading the pitch to investors, have already pared their ambitions, opting for a solely primary issuance after differences on pricing expectations with external backers. Global investors including KKR PIF and Silver Lake own up to 33% of Jio following a massive fundraising in 2020.A year ago, bankers were touting it would be worth $170 billion.

It also suggests that the $188 billion Reliance has failed to convince the market of the value of Jio's modern network. Six years ago, it talked up a dazzling list of investments across its "digital ecosystem" including in "smart devices, cloud and edge computing, big data analytics, artificial intelligence, Internet of Things, augmented and mixed reality and blockchain". But Jio still earns 94% of its profit from volume-led monetisation of its 524 million mobilers. At $102 billion, Jio would command a multiple of 30 times its earnings for 2027, per Visible Alpha estimates, a negligible difference to its much older rival Bharti Airtel's 29 times.

How Jio has emerged from upstart to dominance in India remains impressive. But the IPO pricing would crystallise an annualised return in local currency terms of roughly 12% over its 2020 equity valuation of 4.9 trillion rupees and less in US dollar terms. That’s less of a problem for strategic backers like Meta Platforms and Google but returns below 20% are poor for private equity backers, and the disappointment could dampen future fund allocations to India. If the Ambanis want the IPO to fly for incoming retail investors, they may need to cut pricing expectations even further.

So, why not wait? Around the time global investors came in, Mukesh Ambani pledged to move towards listing Jio within five years. That means Jio is already pushing the upper end of a traditional investment period for private equity. What's more, there is no guarantee that market conditions will improve anytime soon; India's National Stock Exchange cut the size of its IPO by more than 15% last month and the benchmark Nifty 50 stock Index has lost 14% of its value this year. Jio's IPO won't hand its backers cash, but it opens up a route to sell later. Leaving financial investors trapped would be even worse.

Follow Ujjaini Dutta on Jio Platforms, the telecom unit of India's Reliance Industries, is set to price its IPO shares at between 1,065 and 1,119 rupees each, Reuters reported on October 9, citing four bankers on the deal. This would value the company's equity at between 9.8 trillion Indian rupees ($102 billion) and 10.3 trillion rupees.

The company was targeting $131 billion in June when the draft papers for the offering were filed, the Reuters report noted.

During the pre-IPO investor roadshow, Jio Chair Akash Ambani was asked why it merits a premium to rival Bharti Airtel and how the company plans to eventually charge for the digital services and platforms it currently provides at no direct cost, Bloomberg reported on October 9, citing people who attended the meetings.