Target: ₹2,815

CMP: ₹2,283.95

Given the huge growth potential in India’s digital market (likely to grow 4-5x to about $1 trillion by FY25), telcos are looking to leverage their subscriber base and transform themselves from being mere connectivity suppliers to smart digital solution providers.

Jio clearly leads others in this monetisation race due to: its large +416 million telecom subscriber base and stakes in various digital platforms; presence of a large number of apps, which improves subscriber stickiness; and can efficient business structure that demarcates the core connectivity business and the digital business.

Jio’s B2C approach also offers a wider moat to monetise digital opportunities. We assess the equity value of the opportunities for Jio’s digital assets – Video (Jio TV and Jio Cinema), Audio (Jio Saavn) and IoT – at $1,500 and estimate that it contributes about ₹120/share (out of total Jio’s valuation of ₹930) to our RIL’s target price of ₹2,815; this implies about 2.2x the investment done by Jio to build these assets.

We reiterate Buy on RIL given its industry leading capabilities across businesses and expectation of a strong 18-20 per cent EPS CAGR over the next 3-5 years.