5 December 2019
Update | Sector: Oil & Gas
The Jio boost!
TP: INR1,836 (+18%)
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
9841.9 / 137.5
1614 / 1055
Further to its price-hike announcement last week, RJio – along with Bharti and VIL
– has rolled out new tariff plans with effective hike of ~27%, which should result in
58% increase over annualized 2QFY20 EBITDA.
While the absolute discount between RJio and Bharti/VIL’s price plans are
constant at INR40-50 for most of the popular quarterly bundled plans, the
discount of RJio’s plan over Bharti/VIL’s plan has reduced to 8% from 11- 13% in
We raise the equity valuation of RJio from INR280/share to INR500/share as a
result of the tariff hike. We raise the target price of RIL from INR1,630/share to
Financials Snapshot (INR b)
FY19 FY20E FY21E
5,671 6,246 7,140
EPS Gr. (%)
Shareholding pattern (%)
Sep-19 Jun-19 Sep-18
FII Includes depository receipts
Stock Performance (1-year)
Sensex - Rebased
Effective price hike of ~27%; 58% rise over 2QFY20 annualized EBITDA
Following its announcement to raise tariffs, RJio has revealed new effective
price hikes beginning 6
While Minimum Recharge Price plans were hiked by 32% (now beginning at
INR129), the popular monthly plans witnessed a price hike of ~25-30%.
High ARPU prepaid plans have seen ~27% price hike, which would result in
ARPU increasing by INR38 from INR142 to INR180.
While no rates have been disclosed for low ARPU Jio feature phone
subscribers, we assume ~30% price hikes for these subscribers too. Low
ARPU Jio phone subscribers would probably see a hike of INR25 in ARPUs
from INR84 to INR109.
The price differential between RJio and Bharti/VIL’s price plans is constant at
~INR40-50 for most of the popular quarterly bundled plans; however, we see
the discount of RJio’s plan over Bharti/VIL reducing to ~8% from ~11-13%
witnessed in the previous months.
The hike in ARPUs should result in ~INR134b/INR119b incremental
revenue/EBITDA, which is ~25%/58% rise over the previous revenue/EBITDA
(2QFY20 annualized) with 89% incremental EBITDA. Subsequently, we have
revised our revenue/EBITDA estimates upwards by 6.7%/13.8% to
INR553b/INR255b for FY20E and by 24%/44% to INR829b/INR463b for
This should result in incremental EBITDA of INR20/share for RJio with an
implied EV/EBITDA multiple of 11x, taking the target price to INR500 (earlier
RJio’s net debt of INR2,042b does not take into account the recent capital
reclassification, which would shift INR1,080b debt to RIL, but may not alter
the overall net debt and TP of the company. However, RJio’s net debt
includes fiber debt of INR460b, which is part of the InvIT but is yet not sold
to an external investor.
Discount over Bharti/VIL reduces; Revenue/EBITDA to rise by ~27%/58%
Swarnendu Bhushan- Research Analyst
(Swarnendu.Bhushan@MotilalOswal.com); +91 22 6129 1529
Aliasgar Shakir – Research analyst
(Aliasgar.Shakir@motilaloswal.com); +91 22 6129 1565
Sarfraz Bhimani - Research Analyst
(Sarfraz.Bhimani@MotilalOswal.com); +91 22 6129 1566
2 April 2019
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.