Reliance Industries may test Rs 1400, says Deven Choksey

Deven Choksey, MD at KRChoksey Investment Managers told CNBC-TV18, "I think probably the telecom industry and the investors would take some time to understand the entire offering of Reliance Jio. As I understand, it is all network coming into one connection that is what is more important, whether it is telecommunication, whether it is TV connection or internet connections or for that matter data and voice together. All connections are coming into one. As I see it, I think if you basically simply analyse this is bringing down your bill as a customer by one-fifth and I can clearly see the data on that front." "Assuming that 10 crore customers generating Rs 500 per month kind of a subscription revenue or revenue, it would translate to Rs 5,000 crore worth of revenues for the months; Rs 60,000 crore for the year. I think at Rs 25,000-27,000 crore EBITDA performance for the company in a full year of working at 10 crore customer. I feel that this is where the potential lies. Even if one has to moderate some amount of money out of this Rs 500 per month it is still suggesting that the company would probably make profits in the first year of working. So, this is where I see opportunity in case of Reliance Industries. Maybe I think you can probably go wrong by three months or six months, but here it is going to stay and probably it is likely to give maximum amount of benefit to the consumer per se and to the company going forward. It is an opportunity as I see it for investments," he said."At Rs 25,000-27,000 crore EBITDA you would probably end up with a profit before tax (PAT) after deducting interest and depreciation and other allocations of somewhere around Rs 9,000-10,000 crore in a year of working which would translate to somewhere around between 27 to 30 percent of the total profits of Reliance. Certainly, you add up that particular amount into price of Reliance and that is at 10 price multiple at which the stock is right now trading on FY18 earnings estimate. I think the stock price would be somewhere around close to Rs 1400 and that is how I look at this particular possibility of an upside into the stock price."Disclosure: Reliance Industries has acquired management control of Network18, which owns TV18 Broadcast and moneycontrol.com