Kotak Institutional Equities (KIE) estimates that about 20-25% of Reliance Jio Infocomm’s net revenues for Q2FY18 may relate to revenues earned in the three months to June. A subsidiary of Reliance Industries, Jio’s net revenues from operations in the three months to September came in at Rs 6,147.06 crore while the net loss was Rs 270. 59 crore. On October 13, the company said in a release that with a consumption of 378 crore GB data in the quarter, it was the world’s largest and fastest growing mobile data network. The average revenue per user (Arpu) during the quarter was Rs 156.40 while the number of wireless data subscribers was 138.6 million. An analysis by KIE notes that a portion of revenues may relate to recharges in Q1FY18 as also the amortised value of the Rs 99 paid by each subscriber to enrol for Jio Prime. “We estimate net Arpu pertaining to 2QFY18 to be around Rs121 or 77% of reported Arpu. Essentially, we estimate that 20-25% of revenues reported in 2QFY18 are prior period (1Q) in nature,” the brokerage noted in a report.
In this context, Jio’s reported Ebitda (earnings before interest, tax, depreciation and amortisation) of Rs 1,440 crore for 2QFY18, implying an Ebitda margin of 23.5%, may not be fully reflective of the quarter’s performance. “There is an element of timing mismatch on revenues and costs — while 2Q revenues included some revenues pertaining to 1Q, costs related to 1Q had largely been capitalized,” the analysts observed.
The brokerage draws attention to the depreciation and amortisation (D&A) policy adopted by the company, noting that Jio used the unit of production method, similar to the upstream oil and gas business. “Jio has adopted units-of-production method for accounting D&A, linking it with actual data consumption on the network,” the analysts noted. They added that Jio reported D&A expense of about Rs1,180 crore for the quarter or Rs 4,740 crore annualised. This would imply a 3.25% rate on capitalised assets of Rs1.46 lakh crore as compared to 7-8% accounted by other telecom companies, they said.