After posting a stellar performance in the first quarter, analysts expect the share price of Reliance Industries (RIL) to continue to do well helped by its telecom unit Jio.

On June 30, RIL posted a profit of Rs 13,248 crore, the highest ever by any private Indian company, aided by a nearly threefold jump in Jio’s profit to Rs 2,520 crore.

Analysts said Jio will continue to outperform in the telecom market where it is a leader with 398 million subscribers, and as competition struggles with legacy technology and high debt burdens.

“The positive trend in Reliance Industries is expected to continue going forward led by Jio’s performance,” said Sudip Bandyopadhyay, Group Chairman, Inditrade Capital.

He pointed to the sharp 7 percent jump in Jio’s average revenues per user (ARPU), which was aided by a recent tariff hike the company undertook amid a surge in data consumption during the lockdown.

“The jump in ARPU was better than expected. The company is likely to hike tariffs again, which will further aid revenues,” said Bandyopadhyay.

RIL Chairman Mukesh Ambani has said the company plans to list Jio on global exchanges and will induct new investors in JioMart, its recently-launched ecommerce play, and its retail business.

Bandyopadhyay says both these events will be the key triggers going ahead for the company's growth.

"The listing of Jio and investments in retail business will further unlock the valuations of the company. We are positive on the stock and see more upside going ahead," he said.

Broking firm Motilal Oswal said as the market leader, Jio will continue to have pricing power, which could drive its ARPUs further.

Besides, Jio’s parent, Jio Platforms, saw a record fund raising of Rs 1.52 lakh crore, as marquee global tech investors lined up to own a share in a company that not only owns India’s largest telecom firm, but also offers a wide range of digital services.

“Jio has evolved from merely a telecom player to a digital company, delivering on its strategy of launching an array of digital products and services,” said Motilal.

The firm said it would ascribe strong valuations to the company, “to capture the digital revenue opportunity, expected gains from any potential tariff hikes, growing market share and possible rationalization of tax levies for the sector”.

It advised investors to buy the stock, and increased its target price to Rs 2,250, thanks to its earnings revision for Jio.

(Disclosure:

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First Published:Jul 31, 2020 2:59 PM IST