Telecom stocks extend rally; Voda Idea up 32%, new 52-wk high for Airtel

After Jio's tariff hike announcement, RIL is on the verge of hitting the Rs 10 trillion m-cap mark

The rally in telecom stocks continued for the fourth straight session on Wednesday, after Reliance Jio announced that it will, along with Bharti Airtel and Vodafone Idea, increase tariffs in an appropriate way over the next few weeks.

Among individual stocks, Bharti Airtel climbed 3 per cent to Rs 453, also the stock's fresh 52-week high, on the BSE. Vodafone Idea surged as much as 32 per cent intraday to Rs 7.93 on the BSE. In fact, the stock has now rallied 204 per cent from Friday's low of Rs 2.61.

Reliance Industries also continued its uptrend and gained over 4 per cent to Rs 1,571, also its fresh all-time high  on the BSE. The company is closing on the landmark of being the first Indian company to touch the market capitalisation of Rs 10 trillion. At 9:42 am, the company had the m-cap of Rs 9.92 trillion, BSE data showed.

Reliance Industries also issued a statement to the exchanges today, saying,".. 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." READ THE FULL FILING HERE

While the extent of the hikes is not known, both Bharti Airtel and Vodafone Idea have said it will be effective from December 1.

Motilal Oswal Financial Services says a 15 per cent hike by Vodafone Idea and Bharti may be in the offing if the two players intend to go back to the same premium they enjoyed earlier over Reliance Jio. Given the tiered approach they expect the tariffs to impact 70 per cent of revenues (non-feature phone base) and would increase their operating profit by 50-60 per cent each. While this will help, Vodafone Idea will still have its task cut out given lower annualised operating profit of Rs 4,000 crore and debt of Rs 1.2 trillion. For Bharti, the above hike would mean a 25 per cent jump in operating profit on a consolidated basis which for a free cash flow positive company should further aid valuations, they add.

IIFL believes that a 15 per cent hike is sufficient to neturalise the cash flow impact of the Supreme Court judgement for Vodafone Idea and Bharti Airtel, if the penalty is spread over 5-7 years.

At 9:45 am, Bharti Airtel had pared some of its gains and was trading 0.6 per cent higher at Rs 442 per share while Vodafone Idea was up 26 per cent at Rs 7.6 per share on the back of heavy volumes. Reliance Industries, meanwhile, had gained 3.5 per cent at Rs 1,562.9 as compared to 0.5 per cent rise in the benchmark S&P BSE Sensex.