Analysts cut Reliance Jio valuation on revenue growth, cost concerns

Time of India

27-04-2025

ICICI Securities said Jio faced "higher inflation across cost items", restricting Ebitda margin expansion. In Q4FY25, the telco's Ebitda margin stood at 52.8%, unchanged sequentially. Jio's network costs rose 6.9% on-year to Rs 8,400 crore, while selling, general & administrative (SG&A) expenses increased nearly 42% on-year to Rs 1,980 crore. Employee costs and access charges rose 4.3% and 132% on-year to Rs 504 crore and Rs 494 crore respectively. Interest costs too surged 34% on-year to Rs 1,346 crore as interest on 5G spectrum started reflecting in the company's P&L, it added.
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KOLKATA: Analysts have cut Reliance Jio 's enterprise valuation (EV) to $111 billion from $117 billion on concerns of lower revenue flow-through from the next tariff hike - likely in late-2025 - and higher costs.Jio has underperformed second-ranked Bharti Airtel in converting the July 2024 mobile tariff hikes into revenues, according to the analysts. The telecom market leader's mobile revenue growth since the headline rate hikes is estimated at a peak of 13%, trailing Airtel's 17%."We cut Jio's Ebitda estimates for FY26/27 by 3%/6% due to sustained increase in sales & distribution (S&D) costs and lower flow-through from the next tariff hike, assumed in late-2025. Consequently, we cut Jio's EV from $117 billion to $111 billion," IIFL Securities said in a research note seen by ET.The brokerage added that Jio recorded an estimated 10.7% mobile revenue growth since the July tariff hikes. "After factoring in any future flow-through, Jio's benefit may be 13% versus Bharti's 17%," it added. This extra flow-through has been factored in as Jio's management expects a small uptick in the next two quarters from subscribers on longer-duration annual plans.On Friday, Jio reported a 24.5% on-year growth in net profit for the March quarter at Rs 6,642 crore. Revenue from operations rose 15.6% to Rs 30,018 crore. Average revenue per user (ARPU) grew 1.4% sequentially to Rs 206, which implies the full residual pass-through of the last tariff hike has not happened even after three quarters. ICICI Securities said Jio faced "higher inflation across cost items", restricting Ebitda margin expansion. In Q4FY25, the telco's Ebitda margin stood at 52.8%, unchanged sequentially. Jio's network costs rose 6.9% on-year to Rs 8,400 crore, while selling, general & administrative (SG&A) expenses increased nearly 42% on-year to Rs 1,980 crore. Employee costs and access charges rose 4.3% and 132% on-year to Rs 504 crore and Rs 494 crore respectively. Interest costs too surged 34% on-year to Rs 1,346 crore as interest on 5G spectrum started reflecting in the company's P&L, it added."...and the cost may continue to rise, driven by the commercial launch of 5G services and increased rollout of its JioFiber (home broadband) service that would help charge more fibre rental cost to the P&L," ICICI Securities said. IIFL Securities added that Jio's S&D costs jumped 7.3% sequentially to Rs 1,013 crore in Q4FY25 as the telecom industry continues to incentivise MNP (mobile number portability) through elevated channel payouts. "A more aggressive Vodafone Idea (Vi) and no tariff hike from state-run BSNL are also likely playing a role in the battle for subscriber acquisitions." To be sure, analysts expect monetisation of 5G services as a potential "sweet spot" for Jio since the telco has a dominant share of 5G subscribers in India.