Sushil Choksey, Indus Equity Advisors

In an interview with ET Now, Sushil Choksey, Indus Equity Advisors , gives his views on the announcements made by Mukesh Ambani in the RIL AGM. Edited excerpts:

How should investors be reading into yet another big bet that Rel Jio is making and this time around a phone that is virtually free?

Sushil Choksey: I think Jio handset announcement along with the plans which are bundled for each and every segment of society be it the two-day plan, five-day plan, or a weekly, or a yearly plan seem very attractive for the consumer and Reliance is going to make life much better by providing a superior experience for every consumer in the country. Based on five million handsets a week and rolling out 260 million handsets – let us assume then the first year the demand is full – they will not only attract Rs 39,000 crore of deposit as Rs 1500 per handset will be provided free and on top of it the consumer earnings which they will have so let us watch out in next one or two quarters .

Would you agree with my assessment that bonus may be a book entry but it is also an endorsement of the fact that the management sees lot of visibility and there is strong understanding of the cash flow now?

Sushil Choksey: I agree 100% that the peak capex cycle be it for Jio or for the petrochemical core business which is going to throw out lot of cash is over and not only over, but based on the announcement which he is just making in the AGM, looks like starting may be for few days in second quarter but third and fourth quarter on full stream should incrementally increase Rs 10,000 to Rs 12,000 crore of EBITDA purely on petrochemical complex be it on refinery of gas, petcoke gasification, ethane import although valuable polyester inputs, PTA, PX everything so that Rs 14,000-16,000 crore based on yesterday’s number should be scaled to Rs 25,000-27,000 crore on operational and refineries already generating in the vicinity of Rs 27,000-28,000 cr so petrochemical and refinery itself as a segment should be showing Rs 55,000 crore of EBIT and PBIT and Jio may consume some cash for next six to nine months and based on the deposit scheme which he has announced he will get Rs 39,000 crore assuming that he is able to deliver five million phones a week. So I think looks like uncertainty, which shareholders has in mind.

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