RIL becomes first Indian firm to hit Rs 10 trillion market capitalisation

In the past seven trading days, RIL has outperformed the market by gaining 8 per cent, after Reliance Jio, the telecom arm of the company, said it will increase tariffs in next few weeks.

Reliance Industries (RIL) on Thursday became the first Indian company to hit Rs 10 trillion market capitalisation (m-cap) after the stock price hit a new high of Rs 1,584 on the BSE. The oil-to-telecom conglomerate's m-cap zoomed to Rs 10,02,380 crore during the trade on the BSE.

The stock ended at Rs 1580, up 0.65 per cent. 

In the past eight trading days, RIL has outperformed the market by gaining 8 per cent, after Reliance Jio, the telecom arm of the company, said it will increase tariffs in next few weeks. In comparison, the S&P BSE Sensex has gained one per cent during the same period.

"Like other operators, we will also work with the Government and comply with the regulatory regime to strengthen the industry to benefit Indian consumers and take measures including appropriate increase in tariffs in next few weeks in a manner that does not adversely impact data consumption or growth in digital adoption and sustains investments," the statement had said.

Analysts believe tariff hike by telcos may boost sector revenue by at least 15-20 per cent in FY21.

“We think RIL broadly should hold up given it offers a one-of-a-kind exposure to the consumer and digital segments via its major investments in telecom, largest retailer status, and upcoming foray into e-commerce. The refining environment has weakened materially and Petchem spreads across PE and PX have also come off sharply. We build in a large improvement in spreads and believe RIL should continue to benefit from healthy Naphtha-Ethane spreads and IMO,” analysts at JP Morgan said.
 

While all three telecom companies have publicly commented about raising tariffs, none of them have given any indication of how great a hike would they undertake. For Jio, we build in a 25 per cent hike in average revenue per user (ARPU) over the next two years. Admittedly, higher tariffs should also likely result in lower subscriber additions from here, but overall the large ARPU increase drives our earnings upgrade.

Retail should continue to report strong growth as RIL remains focused on store expansion with scope for margin expansion, the brokerage firm said in a report dated November 20, 2019.

We maintain our 'Neutral' rating even as valuation multiples seem stretched and the core businesses environment is weaker, as we think the consumer business remains on a strong footing. The consumer business re-rating + de-leveraging expectations should continue to drive relative outperformance from here, it added.

“Jio’s revenue market share (RMS) may see a bigger jump over the next couple of quarters given the recent tariff hikes it has taken (charging for off-net outgoing calls)”, according to analysts at SBICAP Securities. In an industry wide tariff hike scenario, assuming Jio continues with subscriber gains its market share gains may accelerate further, it added.