Reliance Industries, first Indian company to hit Rs. 6-trillion market-valuation
Mukesh Ambani-led Reliance Industries Limited has reached yet another milestone by becoming the first Indian company ever to cross a market capitalization of Rs. 6-trillion. Its shares recently hit an all-new lifetime high; its current market valuation stands at Rs. 6.02-trillion. Its shares surged over 75% in 2017 so far. The recent tariff hike by Reliance Jio also contributed to RIL's stock price rise.
Reliance Industries Limited added Rs. 3-trillion market cap since the company's telecom arm Reliance Jio started charging its subscribers in April. Also, the telco recently increased its prices. The tariff of its most popular Rs. 399 84-day plan was hiked by 15% to Rs. 459. Analysts believe such tariff hikes by Reliance Jio will improve the profitability of the company.
Morgan Stanley stated: "RIL's 15-20% hike in telecom tariffs raises confidence in our bullish (versus consensus) earnings estimates. It reduces drag on energy returns from telecom with sustainable ROE (return on equity) rising to 15%- among the top quartile in our global energy coverage."
On 13 October, Reliance Jio Infocomm reported a profit at EBIT (earnings before interest and tax) level despite suffering a net loss of Rs. 271cr. It posted Rs. 6,147cr revenue and Rs. 260cr EBIT. PhillipCapital, a financial institution, said Jio would maintain the revenue traction in upcoming quarters while the decreasing inter-connection usage charges (IUC) will help the telco keep costs under control.
PhillipCapital stated, "We find that Jio is increasingly growing in confidence about its network and product quality and the pace of ARPU (average revenue per user) increases should sustain as the value offered by Jio still far exceeds the incumbents' plans by a significant margin."
PhillipCapital said the telecommunications sector in India is witnessing a lot of "consolidation", which leads to a decrease in the number of choices for consumers. Due to this, the telcos will compete over the service quality in the mid and long terms, increasing the industry's ARPU (average revenue per user). PhillipCapital added it is "highly optimistic" on the Indian telecom industry's prospects.
Several analysts believe that Jio's tariff hike would have a positive impact on its rivals like Bharti Airtel, Vodafone, and Idea. It would enable the incumbents to raise prices which may help reduce losses. Reliance Jio's entry has disrupted the Indian telecom market.