Reliance Jio annual report: Jefferies finds 8 key takeaways – News Air Insight

Reliance Jio’s FY25 annual report highlights the telecom major’s focus on expanding 5G services, broadband penetration, and scaling enterprise offerings. According to global brokerage Jefferies, Jio turned free cash flow (FCF) positive with over five-fold year-on-year jump in revenues from external clients for Jio Platforms and Reliance Jio Infocomm.

However, the report also cautioned that while return on invested capital (ROIC) improved, further tariff interventions and sharper monetization of services will be required to sustain margins.

Jefferies also highlighted that Jio’s elevated capitalized costs and a large share of assets under development weighed on near-term profitability metrics. Depreciation and amortization (D&A) are likely to increase further as more assets get commercialized.

Still, the brokerage pointed out that Reliance Jio remains on track to benefit from strong 5G adoption, growth in fiber connectivity, and non-connectivity revenues from its platforms and enterprise solutions.

Key Takeaways from Jefferies’ analysis of Jio’s FY25 Annual Report:

1. Multiple growth levers: Reliance identified four themes in telecom — rapid 5G adoption with 191 million subscribers (45% of wireless data traffic), broadband expansion through JioFiber and JioAirFiber, scaling of enterprise business with IoT, cloud and WiFi solutions, and platform development via JioBrain and AI-based services.
2. Sharp jump in non-related party revenues in Jio Platforms: Standalone revenues rose 57% YoY to Rs 1.19 trillion, with revenues from external clients rising over five-fold to Rs 22 billion. Over half of external revenues came from professional fees, network operating costs, PPE purchases, and S&D costs billed by Reliance Jio.
3. Sharp rise in Fiber costs to continue: Network operating cost growth remained low at 8% YoY due to slower growth in fuel costs, but other expenses rose 17% YoY to Rs 88 billion. Growth could remain elevated with future InvIT usage, Jefferies said.
4. S&D costs growth to moderate from FY26: Commissions paid to Reliance Retail rose 17% YoY to Rs 35 billion, while S&D costs grew 46% YoY to Rs 36 billion. However, Jefferies noted that “growth in S&D costs from FY26 is likely to moderate” as commissions stabilize.
5. High share of assets under development understates D&A: Jio’s gross fixed and intangible assets grew 7% YoY to $56 billion, of which 22% is still classified as assets under development. Jefferies highlighted that cumulative D&A has increased by 100% since FY21, and with asset pool expansion of 149%, D&A costs will rise further.
6. Moderating capex to support higher FCF: CFO grew 20% YoY due to working capital release of Rs 85 billion. Alongside 15% YoY decline in capex at Rs 441 billion, this helped Jio turn FCF positive. With peak 5G capex behind, Jefferies expects the FCF trajectory to improve.
7. Slight improvement in ROIC: Net liabilities stood at Rs 1.87 trillion, up 10% YoY, while net debt-to-EBITDA was at 2.9x. ROIC improved by 70 basis points to 6.4%. Jefferies said: “Higher 5G monetization and further tariff interventions may be needed to support higher ROICs.”

Jefferies maintained that Jio’s near-term profitability remains pressured by high capital intensity and rising depreciation, but structural levers such as 5G adoption, broadband scaling, and enterprise monetization provide long-term growth visibility.Also read: HAL, among other defence stocks in focus after Govt clears Rs 62,000 crore Tejas Mark 1A deal

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Time)