NSE and Jio Platforms are set to launch mega IPOs worth ₹32,000 crore and ₹38,000 crore, respectively. While both are market leaders, history shows that even strong businesses can deliver weak returns if listed at high valuations. Investors should look beyond the brand name and focus on the price-to-earnings multiples relative to the broader market average.
What Happened
The National Stock Exchange (NSE) and Jio Platforms are preparing for major Initial Public Offerings (IPOs) that are expected to be among the largest in India. Jio Platforms is planning to raise approximately ₹38,000 crore through a fresh equity issuance, which the company intends to use to reduce its debt. Simultaneously, the NSE is planning an IPO valued at around ₹32,000 crore. This offering is structured as an 'offer for sale,' meaning existing shareholders like the State Bank of India (SBI) and a special purpose vehicle managed by Morgan Stanley will be selling their stakes.
The Valuation Debate
While these companies are well-known, the primary concern for potential investors is the valuation at which these shares will be offered. Analysts are projecting price-to-earnings (P/E) multiples for Jio Platforms in the range of 41x to 43x. When evaluating Jio, analysts often compare it to Bharti Airtel, which trades at roughly 13x its Enterprise Value to EBITDA. However, a direct comparison is complex because Jio is not just a telecom operator; it also includes businesses like Jio Cinemas, Jio Finance, and various AI initiatives.
For the NSE, analysts expect a P/E multiple of approximately 43x. While this is lower than the 63x P/E at which the Bombay Stock Exchange (BSE) currently trades, many market observers still consider a 43x multiple to be expensive. The central question for investors is whether the growth potential of these businesses justifies the premium price that promoters may seek at listing.
Lessons From Past IPOs
History offers a reminder that strong business fundamentals do not always guarantee good stock returns if the entry price is too high. Several large Indian IPOs have struggled after listing because they were priced at high premiums. For example, Life Insurance Corporation of India (LIC) listed in 2022 with a P/E multiple of 186x and has provided very limited annual returns since. Similarly, Hyundai Motor's IPO, which debuted in late 2024 with a P/E of 24x, has also seen muted performance compared to initial investor expectations. One97 Communications (Paytm) has also seen its stock price decline since its high-profile listing in 2021.
Why The Market Average Matters
The Nifty 50, which represents the largest companies in India, currently trades at an average P/E of roughly 21x. When IPOs are priced at significant premiums to this market average, they carry a higher risk of underperforming. The data suggests that purchasing shares at steep valuations, especially when the broader market itself is trading at higher multiples, can limit the room for price appreciation for retail investors.
What Investors Should Track
The most important factor for investors in these upcoming IPOs will be the final offer price relative to the company's projected earnings. Investors may want to look past the 'mega' size of the IPO and the brand recognition to evaluate the valuation multiples against sector peers and the broader market average. Tracking the price-to-earnings ratio and how it compares to the current Nifty 50 average will be a key step in assessing whether the offering is reasonably priced.