Brokerages advise buyers to stay with RIL, but flag Jio concerns

Most brokerages retained positive view on Reliance Industries citing reasonable valuations but remained concerned over high capital expenditure on Reliance Jio Infocomm.

RIL on Monday said it will invest a further Rs 30,000 crore into Jio to enhance its network coverage and capacity, taking total investment in the venture to over Rs 2 lakh crore.

Worries that the capital expenditure on the telecom venture would drag the company's finances pulled the stock down by over 3% to Rs 1,041.30 on the BSE on Tuesday.



“...high underlying liability on balance sheet leaves little room for equity upside even assuming full upside from downstream projects and reasonable value for Jio,“ said Jefferies, maintaining cautious view on RIL.

Credit Suisse trimmed target price by 1.5% and stated it expect capex intensity on Jio to remain high as the company looks to expand its coverage to cover over 95% of the country's population.RIL is already pricing in benefits of petrochem expansion and robust refining margins going ahead, it said.

CLSA took a more positive view on Jio, stating that there is a good chance that Jio will be made a paid service from April given high subscriber base and improvements in service quality. RIL is CLSA's top buy in oil and gas sector.