Reliance Jio Infocomm, the telecom arm of billionaire Mukesh Ambani’s conglomerate Reliance Industries, is preparing to initiate its initial public offering (IPO), potentially raising around $4 billion in what would be India’s largest-ever listing. Sources close to the company indicate that Jio could file its draft prospectus with India’s capital markets regulator shortly before Ambani’s annual shareholder address, scheduled for later this week.

The anticipated public offering marks a delayed milestone for Jio, which Ambani had pledged to complete in the first half of 2024 during his annual speech last August. The postponement comes amid a challenging period for Reliance Industries, whose share price has declined about 15 percent year to date, and whose net profit for the quarter ending in March fell by 13 percent compared to the same period last year. The downturn coincides with disruptions in the company’s core refining business caused by instability in the Gulf region.

Jio’s delayed IPO occurs against a broader backdrop of subdued activity in the Indian equity market, which has been dampened by geopolitical tensions stemming from the recent US-Israel-Iran conflict. This turmoil has unsettled global markets and particularly affected India, where about 90 percent of oil is imported through the Strait of Hormuz, a strategic chokepoint impacted by the ongoing crisis.

Earlier expectations of a robust pipeline of IPOs, including high-profile listings such as Walmart-owned PhonePe, have been interrupted or deferred due to the uncertainty. According to data from Prime Database, the total value of Indian IPOs in 2024 has fallen 39 percent year on year to approximately Rs198 billion ($2.1 billion).

Market experts attribute the slowdown in the IPO market to heightened volatility and reduced liquidity amid geopolitical risks. Anurag Byas, India head of global markets solutions at Rothschild, noted that such events typically cause IPO markets to contract as investor confidence wanes. The Indian rupee has also suffered, hitting record lows, while the country’s equity markets have lost ground relative to other Asian markets such as Taiwan and South Korea. The benchmark Nifty 50 index is down roughly 8 percent so far this year.

Foreign institutional investors have pulled a record $30.7 billion from Indian equities during 2024, compounding market pressures. Domestic investors, who traditionally underpin local stock market activity, have also scaled back their purchases amid valuation mismatches between promoters and investors.

Despite recent challenges, the Indian equity market saw some recovery this week, with the Nifty 50 rising 1 percent following news of a preliminary US-Iran agreement to reopen the Strait of Hormuz. Analysts expect the IPO market could gain momentum in the latter half of the year, mirroring last year’s pattern. However, investor caution persists.

Suresh Jain of 3P Investment Managers highlighted that while the secondary market may see increased activity, IPO issuance in terms of scale is likely to remain subdued compared to recent years. He emphasized investors’ heightened focus on quality and pricing, especially after a notable proportion of recent IPOs have underperformed in the months following their listings. Macquarie Capital reported that about 40 percent of Indian stocks delivered negative returns one month after IPO.

As Reliance Jio prepares to enter the public markets, the company and the broader Indian IPO landscape face the challenge of balancing investor expectations with prevailing economic and geopolitical uncertainties.