In the first week of January, CLSA had projected that Reliance's capital expenditures are set to go down overall as major petrochem and gas projects worth over $40 billion start to deliver. The boost in earnings from these projects, CLSA said, was expected to come in 12-15 months.
However, UBS issued a sell call on Reliance yesterday with a price target of Rs. 870, and said that RIL’s $60-billion spend on expanding petroleum coke, gasification, petrochemicals and its telecommunications businesses wouldn’t start generating cash and an earnings boost anytime soon. THis would mean that the company's debt would remain high in the short term - debt that has been added on to thanks to aggressive spending by Reliance's telecom arm, Reliance Jio.
The company's share price has been trending lower since UBS' call and is below its 50 day SMA. In December, the brokerage Jeffries had downgraded the stock, also citing Reliance's high debt.
After a lacklustre show last year at the Bengal Global Business Summit (BGBS), the annual event showcasing the state as an investment destination, the coming one is expected to be attended by doyens of industry.These include steel magnate L N Mittal, Mukesh Ambani, chairman and managing director at Reliance Industries, and Sajjan Jindal, chairman and managing director of the JSW Group. Last year in November, the chief minister, Mamata Banerjee, during her visit to the UK, had invited Mittal and got his confirmation. The same month, she met Ambani in Mumbai and invited him as well.Jindal, along with son Parth Jindal, is already in the state for the opening of the JSW cement plant Banerjee inaugurated on Monday. The entire Jindal family was present.Darshan Hiranandani, managing director of H-Energy and Gautam Sashittal, chief executive of Dubai Multi Commodities Centre, will also be attending the two-day event starting Tuesday at the City Convention Centre.Last year, following...
Reliance is reportedly planning its own cryptocurrency, which will be called JioMoney, according to Reliance sources. The effort will be led by Mukesh Ambani's son Akash Ambani, and the company is planning to build a 50 member team around the effort.
This is a significant move by Reliance, perhaps even more significant than its entry into the telecom industry. While JioCoin is being pitched for things like smart contracts, there are much broader implications to India's richest man and India's oil refining czar launching a cryptocurrency. A key aspect of cryptocurrencies like Bitcoin is that users are able to make transactions with each other without going through a bank, or any other intermediary. It is a private currency without government involvement. When Reliance talks about "smart contracts" it means this: blockchains combined with something like Jiocoin will allow managing and enforcing contracts through tech, rather than via government and people-based checks.
Anonymity is therefore high, and government interference minimal. Cracking down on these transactions are extremely difficult for governments once such currencies are themselves legal, because these happen as a secure setup on the open internet. KYC has typically been a bank's responsibility, but in cryptocurrencies banks are not involved in the first place. Combine a currency like JioCoin with commodities like oil, wheat, rice, metals, and you have very large transactions that can happen at high speed and independent of regulation. The share price of Reliance is up on the news, but the effects of JioCoin if this goes through, are more dramatic than we immediately realize. The Indian government has been tight-lipped on the legality of these so far, saying on January 2 that "the government is still studying the issue."
Despite the steep discounts and 'triple cashbacks' being offered to customers, with offerings now priced below the level they were in July 2016, Reliance Jio will report a quarterly profit this financial year and ahead of schedule, according to comments made to the media. A specific decision by TRAI to cut inter-usage connect charges (IUC) charged by telecom providers, hit Airtel and other telecom providers but benefitted Jio, helping it reach profitability early. TRAI slashed interconnect charges by 57% to 0.06 rupees a minute starting Oct. 1 last year, and this fee will fall to zero from Jan. 1, 2020.
Achieving profitability is essential for Jio to be able to function as an independent corporate entity and list separately from Reliance Industries post an IPO. Right now, the fact that Jio is still a Reliance Industries arm makes it difficult to estimate the real expenses and debt that Jio is carrying, separately from the Reliance arm.
Industry analysts have till date reported concerns on the roadmap to profitability, pointing to falling ARPUs across the industry post Jio's entry. Jio however, besides pushing for regulation to reduce IUC charges, has also recently managed to acquire Anil Ambani-headed RCom's spectrum and telecom assets, boosting its expansion plans. The amount spent for RCom assets are likely to show up in March FY18 balance sheets, since the deal details are still ongoing.