Reliance Industries surges 4.5% to 9-year high as Jio paid services begin tomorrow

Reliance Industries shares surged in afternoon trade today, rising to an almost nine-year high, ahead of the start of paid telecom services by the company and release of the data on the number of ‘Prime’ subscribers on its Jio telecom service network. The shares of India’s second-largest company by market cap were trading at Rs 1,326.1 on BSE, up by a whopping 4.5% on Friday afternoon.

Reliance Industries shares are on a sustained rise on the prospects of cash flows from its telecom business, which has seen heavy investments so far. Earlier last month, Reliance Jio Infocomm said it will start charging money from consumers for using its mobile telephony services, which it was offering so far for free.

The company’s free service offers end today, but it is expected to have already got a huge number of subscribers on its Prime plan, under which the users will pay it a fixed sum of Rs 303 per month over the next 12 months. Various media reports peg the number of Jio Prime users at 50 million at present.

Further, the company is also expected to introduce further disruptive tariff plans beginning tomorrow in a quest to acquire more paying customers.

A slew of brokerages have recently raised their target on share prices of Reliance Industries citing the company’s investments not only in telecom, but also in its traditional energy and petrochemicals businesses coming to bear fruit.

Global brokerage CLSA recently raised the target price on Reliance Industries’ shares to Rs 1,500 from Rs 1,350. CLSA maintained its ‘buy’ rating on the stock. It cited optimistic commentary by the company management on its telecom venture Reliance Jio, while also raising the valuation multiple on the refining business.

Jal Irani, Senior VP at Edelweiss Capital Services, had also recently said that Reliance Industries is also expected benefit a lot in the near future as the company’s projects under commissioning will significantly add to free cash flows. “There are $40 billion worth of projects in commissioning phase, which doubles their (RIL’s) productive assets,” Irani said, adding, “We forecast RIL’s free cash flows to rocket from next year as the quarterly capex trend is plummeting.”

Angel Broking had pointed out to the company’s move generate returns on investments. “What shareholders are beginning to appreciate is that notwithstanding the low prices, there is a methodical move towards ROI,” Angel Broking had said in a note after the announcement of Reliance Jio’s tariff plans. “According to early estimates by brokers, Reliance Jio is likely to break even by mid-2018 on an EBITDA basis. That would still be a phenomenal achievement,” it added.