Bernstein Hikes Jio’s Enterprise Valuation to $120:

Reliance NSE -0.98 percent According to analysts, Jio’s enterprise valuation has been sharply revised upwards to $120 billion from around $81 billion now, on expectations that the telco will report strong average revenue per user (ARPU) growth over FY23-27, driven by higher data demand, 4G upgrades, and potential tariff hikes over the next three years.

Brokerage Sanford C. Bernstein expects the telecom market leader’s ARPU – a key performance metric – to rise by up to 33% and 64% to Rs 223 and Rs 275 by the end of FY24 and FY27, respectively. It has projected a 10% (higher) tariff over FY23, as well as modest conversions of feature phone users to smartphones to drive higher ARPU.

“Our calculated enterprise value for Jio is $120 billion based on updated subscriber adds and ARPU estimates,” Bernstein said in a note obtained by ET. Jio’s estimated ARPU growth would also help expand the company’s operating margins (read: Ebitda margins) from 49 percent in FY22 to 55 percent by FY24 and 58 percent by FY30.

Following the fiscal fourth-quarter results, Jefferies estimated Jio’s valuation at $81 billion. The telco’s net profit increased by around 16 percent sequentially to Rs 4,174 crore in the March quarter, on the back of an 8 percent increase in revenue from operations to Rs 20,901 crore. Jio’s ARPU increased 11% sequentially to around Rs 168 in the fourth quarter, aided by a tariff increase and improved subscriber mix.

Nomura Research in Japan expects Jio’s ARPU growth to continue as the full impact of the 20 percent tariff hike implemented in December is expected to be felt between April and September, as the telco has a higher proportion of subscribers on longer-validity plans.

Analysts predict Jio’s overall broadband user base will grow by 48 percent compounded annually between FY22-24, owing to strong demand for fast internet services and increasing availability of fiber connections across Tier 2/3 cities. This has been aided by further consolidation of its leadership in the home broadband services market.

Expects Jio’s home-broadband business to expand over the next few years, as penetration levels remain very low, with less than 5% of households having a Fiber-To-The-Home or ‘FTTH’ connection. According to the most recent subscriber data compiled by the telecom regulator, the company’s home broadband user base more than doubled in FY22 to 5.3 million (from 2.6 million in fiscal year 21) and stood at 5.6 million in April.

Analysts anticipate that Jio will report consistent subscriber additions in the coming quarters as its lengthy clean-up of low-paying and dormant users concludes. The removal of low-value users was largely due to an increase in the introductory offer on its long-term JioPhone subscription plan to Rs 899 (for 336 days) from Rs 749 previously.

Bernstein expects Jio’s mobile user base to grow at a compounded annual rate of 2% between FY22 and FY24, reaching 418.5 million by FY23, 426.9 million by FY24, 466.5 million by FY27, and 509.7 million by FY30.