This article first appeared onBusiness Standard on July 17, 2017
In September last year, Reliance Industries (RIL) Chairman Mukesh Ambani shared the roll-out plan for Reliance Jio’s telecom services at the company’s annual general meeting (AGM). This Friday, shareholders and investors will look for details on revenue generation from these services.
RIL is slated to announce its earnings for the April-June quarter (Q1) on Thursday and hold its AGM the day after. Analysts expect the focus, both in terms of the June quarter numbers and the AGM, would be on the company’s telecom business.
The details are important and will reflect on investor sentiment, which is on the rise. On Friday, the RIL stock scaled to a nine-year high.
While Jio started offering its services in September last year, these services have largely been provided free till March and continue to be offered at discounted prices. Among other details, analysts and shareholders would look for data on revenue generation and the profitability timeline for this business. “Telecom would be the topmost thing to watch, as details on other business like the oil and gas segment have been already spelled out,” said an analyst with a domestic brokerage firm.
Last week, the company extended its promo offers for Jio services, adding to scepticism on any meaningful revenue addition in the current financial year. “We see downside risk to our Jio financial year 2017-18 revenue estimate of $2.7 billion, due to extension of the promotional offers. We are unsure if our FY18 revenue estimate for Jio holds any weight, given that Jio has been capitalising its revenue/expenses thus far,” a Morgan Stanley report dated July 11, said.
In addition to financial details, analysts and investors will look out for official comments on plans for low-cost 4G phones. “While every AGM has the usual expectations on bonus issue (the previous bonus issue was in FY 2009-10), expectations this time are high on another large announcement in telecom, especially 4G feature phones,” analysts with JPMorgan wrote in a report dated July 12.
Others will also look for any announcements related to the company’s expected entry into the “co-fibre-to-home” segment.
Besides Jio, analysts add, the Street will watch for details on plans in both the organised retail and fuel retail segments. “With the BP-RIL investment announcement made recently, one will expect more details on how the fuel retail business pans out, and also, what next for the organised retail business,” said the analyst quoted earlier.
Analysts, on an average, estimate RIL’s consolidated net profit at Rs 7,853 crore for the June quarter.
For its refining business, the company is expected to continue seeing gross refining margins (GRMs) in double digits. “Though we expect GRMs to be weaker on a sequential basis,” said the analyst quoted earlier.
RIL has, so far, not accounted for its telecom business in its consolidated financial performance, and is unlikely to do so for Q1. “RIL had guided forecast to Jio capital and operating expenditure of Rs 18,000 crore in the June quarter and was silent on P&L (profit and loss) recognition from the September quarter. Given that the tariff plan discounts have been extended for another three months, we would be surprised to see if P&L recognition takes place from the September quarter, and hence, operating expenditure and interest should continue to get capitalised,” the JPMorgan report said.