Jio and retail: Future game changers for Reliance, says Deven Choksi

Help us with your first cut on Reliance’s earnings because what we’re guessing from our experts is that the Street will start looking beyond the numbers this time around. Although O2C has been the biggest drag this time around, do you think the street will start penciling in or will it recover in the near term and share prices might get some breather on the back?

Deven Choksi: Barring the refining cracks where there is probably a maximum loss on EBITDA, I believe the numbers are a stable set of numbers. Generally, in a commodity-driven business, and overall, the refining cracks are reduced, it happens that you are on a large scale that EBITDA is likely to be slightly reduced. But I don’t think this will be a permanent feature.

This is a quarterly phenomenon that may have to be viewed as a one-off, and by the end of the year, you will see relatively stable to better numbers in the O2C segment as well. The silver lining and the better thing here is that the consumer-facing business, both retail as well as the Jio platform, both these businesses have shown a relatively stable performance. In fact, in the Jio platform, we are likely to see further growth as the full impact of the price increase or tariff increase in ARPU is expected to take place sometime in the subsequent quarters of the current financial year.

I wouldn’t be surprised if year-on-year by the end of the financial year, we probably expect around 15% to 20% sort of growth in ARPU going forward.

So, definitely, this is going to be a game changer, and it could possibly signal the possibility of Jio Platform becoming a listed entity going forward because a large chunk of investment in this particular business is also gone, and I don’t. It seems that the company needs to put in additional capital at this time. Also, the EBITDA base of 60,000 crore is expected to grow at around 20% YoY.

So, you are talking about somewhere around 70,000 to 75,000 crore EBITDA in 2025-26 on an annualized basis. So, this is where all the possibilities are. So, my view is that both Jio Platform and Retail seem to be demerged entities as far as Reliance is concerned. Therefore, the share price should remain relatively stable going forward; That’s what I want to believe.