RIL shares surge again to 8-year high; trading above Rs 1,250

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Published: February 27, 2017 9:57:51 AM

Reliance Industries shares surged again in the morning trade, extending stellar gains of the previous week, after revelation of plans to monetise its telecommunication business under Reliance Jio.

RIL soared as much as 6% to hit Rs 1,253.45, its highest in at least eight years, since May 18, 2009. (Image: PTI)

Reliance Industries shares surged again in the morning trade, extending stellar gains of the previous week, after revelation of plans to monetise its telecommunication business under Reliance Jio.

RIL soared as much as 6% to hit Rs 1,253.45, its highest in at least eight years, since May 18, 2009. It was the top gainer on NSE Nifty, alone contributing to about 37% of the index gains.

Its market cap topped Rs 4 lakh crore. It had earlier last week recaptured the second spot in the list of India’s most valuable companies, beating HDFC Bank.

Reliance shares were cheering the prospect of fresh cash inflows from the commercialisation of its telecommunication services business Reliance Jio at a very healthy price point with the start of paid services beginning April.

Earlier last week, 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. Its tariffs at Rs 303 per month are higher than the industry-wide ARPU (average revenue per user) of sub-Rs 200.

“What shareholders are beginning to appreciate is that notwithstanding the low prices, there is a methodical move towards ROI,” Angel Broking said in a recent note after the announcement of Reliance Jio’s tariff plans. “According to early estimates by brokers, Reliance Jio is likely to break even by mid-2018 on an EBITDA basis. That would still be a phenomenal achievement,” Angel Broking added.

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Further, Reliance Industries is also expected benefit a lot in the near future as the company’s projects under commissioning will significantly add to free cash flows, Jal Irani, Senior VP at Edelweiss Capital Services, said on Wednesday morning in an interview to CNBC TV18.

“There are $40 billion worth of projects in commissioning phase, which doubles their (RIL’s) productive assets,” Irani said, adding, “We forecast RIL’s free cash flows to rocket from next year as the quarterly capex trend is plummeting.”

Edelweiss has a target price of Rs 1,413 on RIL’s shares.

 

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