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RIL shares cross Rs4 trillion in market cap

LiveMint logoLiveMint 27-02-2017 Ravindra N. Sonavane

Mumbai: India’s biggest company by revenue, Reliance Industries Ltd (RIL), on Monday crossed Rs4 trillion in market capitalisation. Last time, the company was seen achieving this milestone on 18 January 2008.

RIL is the second company after Tata Consultancy Services Ltd (TCS) to cross Rs4 trillion in market cap. Currently, TCS has a total market cap of Rs4.88 trillion.

The stock hit a high of Rs1,256.50 a share in intra-day trade on Monday. The last time RIL stock was seen crossing Rs1,250 was on 5 May 2008. In intraday trade, the stock gained as much as 6.1%.

Brokerage firms like Morgan Stanley has an overweight rating on RIL with an increased target price at Rs1,506 from Rs1,280, on the hopes that its earnings may exceed market expectation. Investors have gained over Rs52,000 crore from 21 February, the day when Reliance Jio announced that it will end free data services and start charging its customers from 1 April.

Since then, various brokerage firms have upgraded the stock on the hopes that its arm Reliance Jio may start generating revenue after the company spent over $24 billion on its telecom business.

Moreover, Jio has promised that it will offer 20% more data on any tariff plans announced by other operators even as it was reiterated that voice calls and roaming will remain free on Jio’s network. Jio also announced a Prime Plan at a Rs99 enrolment fee.

“This enticing offer may keep the subscriber addition pace high until March 2017 and may allow Jio to lock in a significant chunk of high data usage subs without losing focus on Arpu (average revenue per user). This should allay fears of any Ebitda (earnings before interest, tax, depreciation and amortization) loss for Jio,” CLSA said in 22 February note to its investors.

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

According to Kotak Institutional Equities, Jio can break even at Ebitda level in FY18 itself if it is able to retain around 50% of subscribers under the Prime membership plan, assuming operating costs of Rs18,000 crore are required to adequately service 50 million subscriber base with unlimited voice/data usage.

Retaining around 50% of existing subscribers may not be too difficult for Jio, given the attractive value proposition and improving customer experience in recent months, the Kotak report said.

At 10.16am, RIL shares were trading at Rs1,249.75 on the BSE, up 5.7% from its previous close, while India’s benchmark Sensex index rose 0.14% to 28,935.47 points.

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