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Reliance Industries, the biggest company by market capitalisation, rallied 2 percent intraday Wednesday to hit fresh nine-year high after it announced new tariff plans to retain subscribers.
The stock touched an intraday high of Rs 1,524.50, the highest level since January 17, 2008.
With reiterating a buy call and target price of Rs 1,710 (implying 15 percent upside), CLSA said, "While we await clarity if Reliance will start expensing Jio from Q2FY18, we believe investors will overlook initial losses during promotional periods and focus on subscriber retention and slow monetisation in coming months."
Upcoming AGM on July 21 is the next key event to watch out for as it may provide more clarity on new legs to Jio's growth, i.e., Broadband and 4G feature phones, it added.
With just few days remaining for promotional period of Summer Surprise to end, Reliance Jio has announced new tariff plans for Prime members. Under Summer Surprise, Jio offered unlimited voice and 1GB daily 4G data for 112 days at promotional price of Rs303 after one-time annual membership fees of Rs 99 for Jio Prime. This has been raised to Rs 399 for 84 days for Prime members.
CLSA said ignoring one-time fees, this is an effective 75 percent increase in tariffs for existing prime members, implying promotional period ARPU (average revenue per user) of Rs 133 per month. This tariff is at a smaller around 30 percent premium to Dhan Dhana Dhan which started from early April 2017 after subscription to Summer Surprise ended and offered 1GB daily data and unlimited voice for 84 days at Rs 309.
Jio has also reiterated its assurance of offering 20 percent more value than the best plan of competitors.
After making Jio's services paid from April 17, this is another step ahead to reduce discounts and improve monetisation in a gradual manner to ensure maximum retention from over 100 million subscribers acquired during the free service period, CLSA feels.
As compared to initially-announced tariff of Rs 303 per month for Jio Prime members, this new tariff is now at a promotional discount of 56 percent from 66/75 percent discount under Dhan Dhana Dhan/Summer Surprise offers.
The research house believes an extended affordable promotional period should further cement consumer habits of high data usage. These promotional tariffs are attractive enough to ensure high share for Jio amongst new 4G subscribers, it feels.
Jio has been able to address the initial voice interconnection issues and deliver consistently high data speeds.
Continuation of this appreciable data experience over the prolonged promotion period should also persuade consumers to make Jio their primary connection even as discounts reduce, it believes.
Reliance Industries outperformed Nifty in last six months period:
At 13:01 hours IST, the stock price was quoting at Rs 1,506.60, up Rs 11.40, or 0.76 percent on the BSE.
Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
Posted by Sunil Shankar Matkar
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