ForNow,FPIsCan Hold on to Ex­tra HDFCBank Shares

Con­firmed by cus­to­di­ans would de­volve on the stock bro­kers

The Economic Times - - Companies: Pursuit Of Profit -

mar­ket cap in a sin­gle day which is equiv­a­lent to the to­tal M-cap of Idea Cel­lu­lar

gained only while the Nifty de­liv­ered a re­turn of times of FY18, nearly cheaper than when it last touched the mark stock. The tar­iff plan of­fered to re­tain its 100 mil­lion ex­ist­ing cus­tomers sug­gests the com­pany will main­tain the av­er­age rev­enue per user (ARPU) at higher than ₹ 300, which is bet­ter than the in­cum­bents and aimed at pro­tect­ing in­dus­try’s data ARPU.

Ac­cord­ing to RIL’s lat­est tar­iff plan, ex­ist­ing cus­tomers — in­clud­ing those who will sub­scribe till March 31 — can pay ₹ 303 per month and get un­lim­ited data and voice us­age on an up­front sub­scrip­tion fee of ₹ 99 per an- No fur­ther ex­ten­sion of the free of­fer is a re­lief for the stock

Ex­pect con­ver­sion to pay­ing sub­scribers to be high

Progress on core projects will be a key fac­tor go­ing ahead Jio’s ca­pac­ity ad­van­tage maybe dif­fi­cult for in­cum­bents to match

Es­ti­mate Jio to have ARPU of 262 by March 2018 and 274 by March 2019

RIL stock still pric­ing in neg­a­tive eq­uity value for Jio, which is pes­simistic Jio’s Prime mem­ber­ship com­mit­ment of 303/ month is a mod­est pos­i­tive ver­sus ex­pec­ta­tion in­creas­ing in the past six quar­ters, FPI hold­ing was at in Dec 2016

of in the ma­jor MF scheme by AUM num for the plan. That will trans­late to a monthly ARPU of ₹ 270 post-tax, which is 33% higher than the in­cum­bents’ ARPU. The street has been pric­ing in Jio’s ARPU at ₹ 262 and ₹ 274 for FY18 and FY19, re­spec­tively, which ap­pear at­tain­able in the new tar­iff struc­ture.

The cur­rent tar­iff plan of­fered by the com­pany is avail­able till March 2017, which is ex­pected to ac­cel­er­ate cus­tomer ad­di­tion. Jio’s cus­tomer base cur­rently ac­counts for nearly 22% of the data Tar­iff plans an­nounced may help Jio break-even at EBITDA level by end of first year of op­er­a­tions

In­crease in en­ergy seg­ment earn­ings, tele­com busi­ness clar­ity to add to tail­wind of in­creas­ing re­turns

Jio can re­al­ize monthly ARPU of 188-209 as­sum­ing mid-tier sub­scriber re­ten­tion rates Jio com­ing on track for mon­eti­sa­tion sooner than ex­pected is a pos­i­tive

Vis­i­bil­ity of a fast ramp-up in user-base be­yond April is low

Jio’s net­work per­for­mance should im­prove as data traf­fic nor­malises High re­ten­tion of sub­scribers will be cru­cial in shap­ing up of prof­itabil­ity Re­tain rat­ing due to rea­son­able val­u­a­tion and likely strong earn­ings growth from stand­alone projects

cus­tomers in the coun­try. An at­trac­tive tar­iff plan is likely to al­low Jio to tap a size­able chunk of high-data user with­out los­ing fo­cus on ARPU. How­ever, a key thing to watch out for would be how the in­cum­bent play­ers re­spond to Jio’s new tar­iff.

An­a­lysts said even if the com­pany is able to re­tain its ex­ist­ing cus­tomers un­der the ₹ 303 per month plan, it could re­sult in breakeven in op­er­at­ing profit, or earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion (EBITDA), in the first four quar­ters since the com­mer­cial­i­sa­tion of its op­er­a­tion, and this al­lay fears of the ex­tended pe­riod of EBITDA losses. Even if half the ex­ist­ing cus­tomers sign up for the ₹ 303 per month plan, it would trans­late into ₹ 18,000 crore in rev­enue per an­num. Mum­bai: For­eign port­fo­lio in­vestors can hold the shares of HDFC Bank they bought on Fri­day even af­ter the stock ex­change no­ti­fi­ca­tion to stop buy­ing mid-way through the trad­ing ses­sion till the Re­serve Bank of In­dia (RBI) asks them to offload them, said a se­nior reg­u­la­tory of­fi­cial. But trades which have not been con­firmed by the cus­to­di­ans would de­volve on the stock bro­kers who ex­e­cuted the trans­ac­tions on be­half of their for­eign clients on Fri­day.

“FII trades in which cus­to­di­ans have given con­fir­ma­tion even if the in­vest­ment limit has been breached will re­main as it is,” the of­fi­cial said. “Sub­se­quently, an anal­y­sis will be done and RBI would is­sue di­rec­tions to offload the stake to main­tain the limit.” Rules do not per­mit for­eign hold­ing of more than 74% in the bank. But, this limit was breached on Fri­day due to hec­tic pur­chases by FPIs af­ter the RBI the pre­vi­ous evening al­lowed fresh buy­ing by over­seas in­vestors in the pri­vate lender with their stake drop­ping be­low the pre­scribed limit. While the RBI is­sued a cir­cu­lar mid-way through the trad­ing day on Fri­day ask­ing for­eign in­vestors to stop buy­ing HDFC Bank shares, many trades had al­ready been ex­e­cuted.

The cen­tral bank had asked all cus­to­di­ans, which han­dle the set­tle­ment of for­eign in­vestors, not to con­firm trades in HDFC Bank done af­ter 1:39 PM --- when the stock ex­change no­ti­fi­ca­tion to bar fresh FPI pur­chases was is­sued --- on Fri­day in which clients were buy­ers. Cus­to­di­ans have con­firmed all trades till 1.39 PM.

Bro­kers say they are un­likely to be hit as bulk of the trades on Fri­day had taken place be­fore the stock ex­change no­ti­fi­ca­tion time. While the RBI no­ti­fi­ca­tion was sent to cus­to­di­ans on Fri­day around 12.56 PM af­ter the FPI limit was breached, stock ex­changes’ no­ti­fi­ca­tion came in only by 1.39 PM.

For­eign port­fo­lio in­vestors in­vested ₹ 8,043.14 crore in In­dian stocks on Fri­day. Bro­kers said ma­jor­ity of it flowed into HDFC Bank shares.

Bro­kers said they are un­likely to be hit as bulk of the trades on Fri­day had taken place be­fore the stock ex­change no­ti­fi­ca­tion time

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