With Reliance Industries chairman and managing director Mukesh Ambani laying special emphasis on Reliance Jio and the way forward for the company, it is little wonder that most analysts and market watchers feel there is huge competition coming in India's telecom, media and digital business.
"Clearly, the plans are much more grandiose in terms of sheer scale and integration level than what any of us expected. It is going to be exciting and I am sure it is going to set the cat among the pigeons for a lot of other businesses, especially broadcast TV," says Prakash Diwan of Altamount Capital Management.
Prayesh Jain of IIFL says the chairman's vision is like magnum opus but one will have to wait and see how it pans outs. "We have not factored in too much of Reliance Jio in our numbers," he adds.
Despite the excitement around it, Jain says it is difficult to factor it in. "We currently value it only at 4.5 times of the book value of the investments that the company is making. That is the way we are valuing and we would continue to do so in the near-term till we get some clarity on the business which would be possibly a year down the line," he told CNBC-TV18. The changes in estimates will happen once the numbers start coming in, he adds.
Mayuresh Joshi of Angel Broking too says while the plans are extremely ambitious and the kind of efforts that Reliance Industries has done on all fronts - backend, frontend, fibre optic networks setup, setting up of data centers - will create back ended return, but it is very difficult to quantify at least on the telecom part what numbers might be from FY16 perspective when it becomes operational in FY17 and it starts getting integrated into the balance sheet, that is when numbers will start playing out.
"Reliance Play, Reliance Jio Play, all these things are very exciting and even the mobile handsets, below Rs 4,000 is going to be plus on a commercial scale," Joshi adds.
Joshi adds that Ambani's comments on the refining business and petchem business also sounds exciting. He also sees better integrated margins on the polymer and polyester front, going ahead. "On the core side of business, the refining business is where Ambani probably is laying his bets on and on petrochemical side one expects the kind of demand versus the addition on the polymer front and even on the polyester front the integrated margin should see a boost. I think margin should expand going forward and with the core capex that Reliance has done, our take is that FY17 should reflect superior numbers." He continues to maintain a very positive stance on the stock.
In the AGM, Ambani said Reliance is constructively engaged with the government to resolve legacy issues on gas pricing, which has been a long-standing area of discomfort for the company, while also adding that it has managed to reduce operating costs by 25-30 percent.
Ambani also said that the company is all set to become India's largest producer of coalbed methane gas. It is also the largest integrated polyester manufacturer globally.
Naveen Kulkarni, co-head research, PhillipCapital, too agrees with the view that competition in media and teleocm space will increase once Ambani's plans fructify. The data space in India especially the high speed broadband space is still a market which is constrained by supply.
"From Reliance Jio perspective they will be very aggressive in terms of pricing because of the kind of capacity they have created. First of all they would have 4G network which itself has a significantly higher capacity compared to 3G network. Second with the kind of optic fibre cable network that they have been putting across India - both intra-city as well as intercity - that will also provide a lot of scale and benefits for them," Kulkarni says.
From that perspective, Kulkarni feels Reliance Jio's marginal costing for data will be significantly lower compared to any other provider in India at this point in time.
However, he adds that one must remember that the needs of a telecom user and a media user are different.
Disclosure: Network 18, which publishes moneycontrol.com, is now part of the Reliance Group.
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