Reliance Industries cheers Jio’s paid services; shares at 8-year high eyeing new cash flows

By: | Updated: February 22, 2017 12:50 PM

As the concerns over customer retention post the start of paid services beginning April mar the celebration of Reliance Jio’s 100 million subscriber base, the shares of its parent company Reliance Industries saluted the prospect of fresh cash inflows, hitting an eight-year high.

Reliance Industries, Mukesh Ambani, 4G LTE, Bharti Airtel, TRAI, Reliance Jio, Vodafone India, Idea CellularReliance Industries shares skyrocketed and were trading up 7.05% at Rs 1,165, close to the day’s high of Rs 1,170.5, contributing to almost the entire gain in the benchmark indices. (Image: Reuters)

As the concerns over customer retention post the start of paid services beginning April mar the celebration of Reliance Jio’s 100 million subscriber base, the shares of its parent company Reliance Industries saluted the prospect of fresh cash inflows, hitting an eight-year high.

Reliance Industries shares skyrocketed and were trading up 7.05% at Rs 1,165, close to the day’s high of Rs 1,170.5, contributing to almost the entire gain in the benchmark indices.

More upside

Jal Irani, Senior VP at Edelweiss Financial Services, said he sees significantly greater upside from here for the shares of Reliance Industries, triggered by the commercialisation of Reliance Jio at a very healthy price point. “Reliance Industries stock is just breaking out. This is just the beginning,” Irani said in an interview to CNBC TV18.

Further, Irani said that other than Reliance Jio, the company’s projects under commissioning will significantly add to free cash flows for Reliance Industries.

Not just Jio

“There are $40 billion worth of projects in commissioning phase, which doubles their (RIL’s) productive assets,” Irani said, adding that those are valued at nothing right now. “We forecast RIL’s free cash flows to rocket from next year as the quarterly capex trend is plummeting,” Irani said, adding that the capital expenditure on Jio is also tapering out and the bulk of the planned $20 billion capital expenditure on oil & gas business is also over.

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Edelweiss has a target price of Rs 1,413 on RIL’s shares. It assigns one-fourth of value in RIL’s shares to earnings from Reliance Jio, a “little higher than that” to its petrochemicals business and about 40% to the refining business, on an operating assets basis.

Raking in the moolah

Earlier yesterday, Reliance Industries Chairman Mukesh Ambani said that Reliance Jio, the newest entrant in India’s highly competitive telecom sector, will start charging fees from users for its voice and data services. Reliance Jio, which launched its services in September last year, has been offering free voice and data services under various sequential schemes. Its current scheme called ‘Happy New Year’ ends on March 31.

From April 1, the existing users of Reliance Jio could subscribe to its services with 1GB data per day and unlimited voice calls within India for Rs 303 per month and a one-time payment of Rs 99. Reliance Jio’s pricing, though seen as very attractive in comparison with the other operators, is still not as disruptive as was expected earlier. Bharti Airtel, Vodafone India and Idea Cellular offer only 1GB data in the entire month for Rs 340-350 per month, with unlimited domestic voice calls.

 

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