On Tuesday share price of Reliance Industry rallied 3.87 percent intraday and became the first company among listed entities on exchanges to hit a market capitalisation of Rs 9.5 lakh crore, after the rival Vodafone Idea and Bharti Airtel decided to increase prices from next month. The share spiked on the expectations that the increase in tariffs by competitors could benefit Jio by adding more users as users generally prefer to go to telecom operator which has lowest tariff rate along with strong network. Following this, Reliance Jio on Tuesday said it will increase mobile phone call and data charges in the next few weeks in compliance with rules.
Today the Reliance?s stock continued its yesterday?s rally and touched fresh record high of Rs 1572.40 on NSE, rising over 4 percent in early trade. Led by gains in its stock price, the company’s market valuation rose to Rs 9,90,366.80 crore during the morning trade.
Reliance Industries gained more than 35 percent in the last one year as earnings are strongly supported by its telecom (Reliance Jio Infocomm) and retail (Reliance Retail) businesses. The retail business has grown phenomenally, registering a seven-fold increase in revenue and a 14-fold increase in profit in the last six years. Jio has already
become the largest operator in India and still signing up more than 10 million new customers each month.
Now with the hike in Jio’s tariff the telecom busines could bring an annual cash flow of more than $1.5 billion, which will help the company achieve zero net debt target by FY21.
The company has received strong interest from strategic and financial investors in its consumer businesses, Jio and Reliance Retail. It will induct leading global partners in these businesses in the next few quarters, and move towards listing of both these companies within the next five years, which will result in a significant value unlocking.
We are positive on the stock and see further upside in its price driven by potential telecom tariff hike, and on hope of higher refinery margins, kickstart of gas production, bottoming P/E cycle, lower capex and ongoing deleveraging. Existing investors should continue to hold the stock, and new investor can add the stock to their portfolio on any dip.