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Reliance Industries shares jump after Jio tariff hike; check CLSA’s share price target

FE Online
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Billionaire Mukesh Ambani-led Reliance Industries got a big thumbs up from global brokerage firm CLSA, following Reliance Jio’s tariff hike. Reliance Industries share price gained by more than 1.7% to hit the day’s high at Rs 1579.85 on BSE. Global brokerage firm CLSA has hiked the target share price to Rs 2,010 from Rs 1,710 earlier. Reliance Jio on Wednesday announced new tariff plans, which are about 15-20 per cent cheaper compared to the revised tariffs of Vodafone Idea and Bharti Airtel. Jio's new tariffs imply that the company has hiked prices to the tune of nearly 40 per cent.

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Taking stock of the development, CLSA said that Jio’s tariff remain at a discount despite it being a big hike. The tariff hike will boost the EBITDA by $1.1-1.3 billion. Jio’s latest plans are cheaper than rivals Bharti Airtel and Vodafone Idea by 7-20%. CLSA sees a further upside to Jio’s profits. Tariff hike on Jio phone is still awaited. Notably, Reliance Jio is offering plans with 28 days validity that come with 2GB data at Rs 129, which is nearly 15% cheaper than what Vodafone Idea and Bharti Airtel are offering are their respective hikes. Similarly, Jio is also offering 1.5GB data per day with 28 days validity at Rs 199, which is 20 per cent cheaper than its competitors. For a similar plan, Bharti is charging Rs 248 and Vodafone Idea Rs 249.

According to CLSA the ARPU (Average Revenue Per User) will be higher for Reliance Jio as customers prefer 28-day plans over 84-day plans. CLSA has raised EPS estimates by 1-8% for the Mukesh Ambani-led telco. CLSA notes that strong profits on tariff hikes and ARAMCO deal are near term triggers for the stock.