Slight beat in Reliance O2C encouraging; retail numbers good: Naveen Kulkarni

Naveen Kulkarni, CIO, Axis Securities PMS, says overall, earnings wise, Jio numbers continue to look good. In the other businesses which are retail and O2C business, there is probably a slight beat in O2C. On a sequential basis, O2C was expected to be slightly weaker so a slight beat is encouraging. The retail business has done pretty well.

A beat coming in on the O2C business of Reliance. How are you seeing the retail as well as the Jio numbers as of now?
Naveen Kulkarni: First of all on the Jio numbers, if I were to look at the headline numbers, I would say that the revenues were slightly lower than what we were anticipating because the ARPU number was a slight miss. However, the subscriber addition number has been almost a million subscribers higher than what we anticipated so that is a good number to look at.

Overall, earnings wise, Jio numbers continue to look good. In the other businesses which are retail and O2C business, as I can see that O2C is probably a slight beat. On a sequential basis, O2C was expected to be slightly weaker so a slight beat is encouraging.


In retail numbers, we were expecting around 7% quarter-on-quarter growth and so seasonally probably a stronger quarter also. So, the retail business has done pretty well.

Firstly, when you look at the telecom numbers, pretty much in line with what the street was estimating, slight dip when it comes to the ARPU side. So, do you consider this as a move now that the company would now have to go ahead and take a tariff hike because without any tariff hike we are not seeing any kind of improvement when it comes to the average revenue per user here?
Naveen Kulkarni: Yes, average revenue per user will typically move up in the long term as a step function, that is when tariff hikes happen. Without, of course, having a stated tariff hike, there is some bit of movement which happens from lower packs to higher packs and so on and so forth, prepaid to postpaid but these are very-very long-term moves and they take a lot of time. So, on a quarter-on-quarter basis, it will be very-very difficult to calibrate what exactly would have happened.

Nonetheless, I would say that tariff hikes will be needed in the long term to take the ARPU up. Without tariff hikes, it is going to always be a challenge. So, from that perspective, we should see maybe tariff hikes coming through, but the timing of that will always remain very-very uncertain.

What is your view on the stock expectation? What I could sense is that every analyst is just giving a thumbs up as of now in comparison to the kind of thumbs down that we have seen. But today the market is going to be open, a special case scenario. Do you see a red or a green or a flattish movement?
Naveen Kulkarni: A significant upgrade in earnings is coming through in Jio. It is difficult to make out from the results perspective if something substantially has moved in this quarter.