Reliance Industries Soars: The Dual Power of Tariff Hikes and Bullish Brokerage Forecasts

Reliance Industries (RIL) shares witnessed a significant surge today, climbing over 2 percent as investors reacted positively to a confluence of strategic moves by its telecom arm, Jio, and highly optimistic outlooks from leading global brokerages. The stock’s robust performance underscored growing confidence in the conglomerate’s future earnings potential, particularly from its digital ventures.

A primary catalyst for this upward momentum was the recent announcement of tariff adjustments by Reliance Jio.

The telecom giant has initiated a hike in its mobile service tariffs, a move widely anticipated to bolster its Average Revenue Per User (ARPU) and, consequently, its profitability. Market analysts are closely watching the impact of these changes, which are expected to translate into healthier financial metrics for Jio, a key contributor to RIL's overall valuation.

Adding fuel to the rally, prominent financial institutions have reiterated their bullish stance on Reliance.

UBS, a global investment bank, maintained its 'buy' rating on RIL shares and significantly raised its target price from Rs 2,750 to a more ambitious Rs 3,320. This revised target reflects UBS's confidence that Jio's approximately 20 percent tariff hike, anticipated to fully impact earnings from mid-2024, will drive a substantial 10-15 percent increase in ARPU.

Furthermore, UBS projects an impressive 15-18 percent growth in Jio’s EBITDA, highlighting a strong earnings trajectory for the telecom arm.

Not to be outdone, Morgan Stanley also reaffirmed its 'overweight' rating on Reliance Industries, setting a target price of Rs 3,046. The brokerage’s optimistic view is underpinned by its analysis that Jio’s capital expenditure (capex) cycle is peaking.

This suggests that the intensive investment phase is nearing its end, paving the way for substantial free cash flow generation. Morgan Stanley believes that a strong free cash flow will enable Jio to sustain high returns and further strengthen RIL’s already robust balance sheet, enhancing shareholder value.

The combined effect of these strategic tariff adjustments and glowing endorsements from top brokerages has painted a vivid picture of strong future growth for Reliance Industries.

The market's reaction today demonstrates a clear belief in RIL's capacity to leverage its dominant position in India's digital and telecom landscape, translating operational efficiencies and pricing power into tangible financial gains for its shareholders.