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RIL shares add Rs1 trillion market cap in 6 weeks

LiveMint logoLiveMint 03-04-2017 Ravindra N. Sonavane

Mumbai: Shares of Reliance Industries Ltd have added Rs1 trillion market capitalisation in the last six weeks as analysts started upgrading the stock on hopes of revenue generation from its telecom venture Reliance Jio Infocomm Ltd which has started charging its users.

The current market capitalisation is up at Rs4.44 trillion from Rs3.41 trillion on 15 February. Its stock was trading near fresh nine-year high at Rs1,380 a share and gained as much as 4% in intraday trade. Since 15 February, the scrip gained nearly 34%, while so far this year it has jumped 26.33%.

On Friday, Reliance Jio announced that over 72 million Jio customers have signed up for Jio Prime membership till 31 March. It also extended its Jio Prime service till 15 April.

“This is well above our and market expectations,” Jefferies India said in a report to its investors.

According to a Kotak Institutional Equities report, a strong initial subscriber base provides some comfort around Jio’s execution and customer experience and, consequently, improves the outlook on telecom contribution, which could help in narrowing of the discount long attributed to Jio’s valuation in the company.

Jio also announced a Jio Summer Surprise for Prime customers. Prime customers who make the first recharge before 15 April using its Rs303 plan (or higher) will get complimentary services for the first three months. Regular tariff plans will be applicable from July, once the complimentary service ends.

“Its strategy to offer complimentary services for another three months, albeit perplexing, seems an attempt to ensure higher conversion to recurring-paying customers,” said Kotak Institutional Equities in a report.

“We would not rule out further surprises or offers from Jio noting recent competitive reaction of lower tariffs, although selectively, by the incumbents,” the report added.

Analysts expect RJio to break even on earnings before earnings before interest, taxes, depreciation and amortisation in fiscal year 2018 assuming a large base of average 83 million paying subscribers with an average revenue per unit of Rs246 a month. On the cash level, analysts expect RJio to break even by fiscal year 2021.

Of the analysts covering the stock, 29 have a “buy” rating and 10 have a “hold” rating, shows Bloomberg data.

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