After revamping the telecommunications sector in India half-a-decade ago, Reliance Industries Limited’s (RIL) Jio has been synonymous with India’s growth story.
After revamping the telecommunications sector in India half-a-decade ago, Reliance Industries Limited’s (RIL) Jio has been synonymous with India’s growth story. Much praise has been garnered by the digital vertical of RIL, which have only augmented after it recently roped in a dozen global investors. However, a look at the non-wireless business of Jio, which forays into segments like education, healthcare, agri-tech, home broadband, IoT, among others too has potential to substantially grow and take Jio’s non-wireless EBITDA to $1.5-2.0 billion in the next 4 year, said a report by global brokerage and research firm Credit Suisse.
Jio’s enterprise value has been pinned at $88.5 billion by the brokerage with a $17.5 billion contribution from non-wireless verticals. The key reasons behind the EBITDA forecast of $1.5-2 billion by Credit Suisse include the competitive advantage that Jio has with its full stack of services in many verticals like online health, financial services, advertising, and education. “Many of these verticals can be scaled up significantly. For instance, on the health front, Alibaba Health in China already has a market capitalization of $38 billion, and ‘Ping An Good Doctor’ has a market cap of $16 billion,” the report said. Byjus, the Indian player in the online education sector is valued at $ 10 billion, after the latest funding round. Jio has already started monetising through advertising on MyJio.
“Reliance is ramping up to offer digital consulting, diagnostic services, and e-pharmacy services, and enabling doctors to take their clinics online. This is an exciting space, and the companies offering a part of these services have become quite large in China already,” the report said. Although the online-health space in India is already crowded, analysts at Credit Suisse believe RIL could explore vertical integration. Jio Health Hub has already been launched and Reliance Life Sciences is an entity of the company provisioning diagnostic tests. In the entertainment space, Jio could also benefit from advertising revenue using JioAds a customised advertisement management tool for brands.
While announcing its financial results for the March quarter, Reliance announced carving out a new business of financial services. Jio Money is how that aim is being fulfilled. JioMoney is now being expanded into a fully-fledged UPI platform, integrated into MyJio which will also offer mutual funds to customers. After connecting a large number of mobile devices in the country to the internet, Jio is working on connecting households with its fixed-line broadband. In its annual report, the company claimed to have connected 1 million homes with fiber services. “The foray into agri-tech, IoT, financial services, and enterprise services is in the early stage, but competition is also limited in most. Half of our FY24E EBITDA of $1.5-2.0 billion should be driven by home broadband and enterprise services and the rest by new verticals,” the report added.
Credit Suisse is neutral on the RIL stock with a target price of Rs 1,690. However, in its blue sky scenario, the RIL shares do see an upside of Rs 2,300 per share. The scenario is built on factors including positive Aramco deal outcome, Jio APRU increasing to Rs 250 and grocery distribution through kirana stores and monetising customer shopping data through advertisements. Slow traction in Jios non-wireless segments stands as a key risk associated with the firm. Currently, RIL stocks are trading at a 52-week high value.