'Reliance Jio wants to ramp up market share, turn profitable... IPO is not priority'

While speculations of Mukesh Ambani's dream business venture Reliance Jio's IPO doing rounds, the telco targets to increase market share and turn profitable rather than stepping into the primary market and raise capital. The 4G operator, which has an enterprise value of over Rs 2 lakh crore, wants to enhance its customer base and improve the quality of service in parallel to expanding the margins. "Raising capital through IPO is the least requirement for a company like RIL at this point of time," said a company executive on condition of anonymity.

Alok Agarwal, chief financial officer, RIL told Business Today in a recent interview for BT500, that a lot of work still needs to be done for Jio. "We want to grow our revenue market share and improve the EBITDA margin... We are thrilled with what happened in the last 12 months. Most of what we wanted to do are being able to do. The best is yet to come," he said (NOT at the context of IPO rumours).

According to the media reports, RIL may consider Jio's IPO in the late 2018 or early 2019. The company declined to comment on the reports.

Jio, which launched its free service in September last year, had switched to fully paid service in the second quarter of this financial year and registered positive EBIT (earnings before interest and tax) of Rs 261 crore on a revenue of Rs 7,213 crore in this period. The standalone EBITDA of Jio stood at Rs 1,443 crore at a margin of 23.5 per cent. It reported a robust ARPU of Rs 156.4, higher than the Rs 154 recorded by market leader Bharti Airtel in the April-June period. The share price of RIL, the parent company of Jio, which was languishing at Rs 500 in February has shot up to Rs 950 by November. Today's closing price is Rs 914.

The asset value of digital service business stood at Rs 2.28 lakh crore - which is larger than RIL's flagship refining business and double that of petrochemical business - at the end of the second quarter, while the liabilities of the segment was at Rs 1.4 lakh crore. At the end of September, the telco had a customer base of 138.6 million.

In the interview, Agarwal said, "Jio balance sheet is the most conservative in the industry, considering the debt-equity. When we start a business, we don't create a highly leveraged balance sheet. The reason why we are EBITDA positive is that we invested in a brand new digital network. It just has a lower cost base... Technology allows us to provide a different cost base than the competitor. That's really from where the EBITDA story comes from."

Jio targets to grow the customer base, build capacities in the network and enhance quality of service. "The customer expectation is high. We are focused on meeting their expectation, delivering the right experience and continue to grow the customer base," he said. Agarwal also pointed out that the researchers predicted Jio to achieve profitability in the next financial year, if not before that.