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RIL shares jump 7.2% to hit 7-year high on hopes of revenue generation from Jio

LiveMint logoLiveMint 22-02-2017 Ravindra N. Sonavane

Mumbai: Shares of India’s largest private enterprise Reliance Industries Ltd (RIL) on Wednesday jumped as much as 7.5%, its biggest jump since May 2009, to hit over-seven-year high, as investors anticipated revenue generation for its telecom venture Jio starting from 1 April.

The stock hit a high of Rs1,170 a share in intra-day trade on Wednesday. The scrip gained in six out of seven trading sessions and rose 13.8% in this period. So far this year, it has gained 8.3%.

On Tuesday, RIL announced that it will end free data service and start charging its customers from 1 April, though voice calls and roaming will remain free.

“We believe this is a significant development as it will likely lead to P&L recognition of Jio in FY18 and also provide much better visibility on its true potential, which has been difficult to gauge under the current free offering in our view,” said Jefferies India in a note to investors.

RIL chairman Mukesh Ambani said on Tuesday that Jio crossed the 100 million customer mark and it will offer prime membership programme which intends to offer several benefits to the members with a cost component attached to them. One of the benefits in the programme is membership for customers at Rs99.

“With Jio announcing tariffs plans and charging customers from April, the incumbents now have breathing space. The battlefield is much more even now with Jio’s low priced offers versus incumbents’ better customer experience and ability to fight price wars. We believe the traffic diversion to Jio should come down from Q1FY18 onwards and significant decline in revenues should get arrested for the incumbents,” said PhillipCapital in a note to its investors.

However, before the 31 March deadline, Jio will come out with a new set of plans which will promise about 20% more data limits compared to the prevailing market plans.

“We believe this is the best of positives for the sector from this announcements,” said Credit Suisse in a note to its investors .

Analysts also expect that its cash flow may go up significantly as its core projects get commissioned by next year. The core projects include its refinery off-gas cracker (ROGC) and petcoke gasifier.

The company, in its December quarter earnings, said that its ROGC has achieved 96% mechanical completion and is expected to be fully completed by the first quarter of financial year 2018.

It also expects ramp-up to start from the second quarter of financial year 2018. Also, petcoke gasifier is expected to be mechanically completed by June 2017. In December 2016, RIL commissioned the first phase of its paraxylene plant

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