Jefferies Bullish on Reliance Jio, Projects Strong Growth Driven by Tariffs and FWA Expansion

According to a recent report by Jefferies, Reliance Jio is strategically positioned for robust growth over the next few years. The brokerage anticipates an 18 per cent compound annual growth rate (CAGR) in revenues and a 21 per cent CAGR in EBITDA between FY26 and FY28. This optimistic outlook is primarily supported by the ongoing rise in mobile telecom tariffs and substantial expansion in Jio's home broadband segment, particularly through its Fixed Wireless Access (FWA) offerings.

Further growth is expected from the scale-up of its enterprise business and the successful monetization of its extensive technology stack. Reflecting this positive outlook, Jefferies has raised its target EV/EBITDA multiple for Jio to 15x, a 10 per cent premium compared to Bharti Airtel, citing Jio's superior growth prospects. The firm has also rolled forward its valuation to December 2026 and increased its enterprise value (EV) estimate for Jio to USD 180 billion.

Jio's broad technology ecosystem, encompassing radios, network core, OSS/BSS systems, and FWA solutions, provides it with a significant competitive advantage. With global 5G penetration still relatively low, Jio's cost-efficient solutions are well-suited to tap into the USD 121 billion global telecom technology market. The company has significantly ramped up its technology investments, evident in a 13-fold jump in patent filings and a 4-fold increase in patent grants over the past two years. Jio has also intensified its participation in global standards bodies like 3GPP for 5G and 6G, increasing its contributions by nearly seven times. Furthermore, Jio is developing AI-based solutions for network optimization and promoting Open Digital Architecture.

Impact: This news is highly positive for Reliance Jio's stock, indicating strong future performance and potential market share gains. It could also positively influence investor sentiment towards the telecom sector. Rating: 8/10

Heading: Difficult Terms CAGR: Compound Annual Growth Rate, a measure of average annual growth over a period longer than one year. EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of a company's operating performance. FWA: Fixed Wireless Access, a technology that provides wireless high-speed internet access to homes and businesses. EV/EBITDA: Enterprise Value to EBITDA, a valuation ratio used to assess a company's worth. EV: Enterprise Value, a measure of a company's total value, including market capitalization, debt, and cash. OSS/BSS: Operations Support Systems/Business Support Systems, software systems used by telecommunications companies to manage their operations and customer services. 3GPP: 3rd Generation Partnership Project, a global collaboration of telecommunications standards bodies that develops specifications for mobile telecommunications technologies. Open Digital Architecture: A framework promoting open, modular, and interoperable systems in telecommunications, allowing for greater flexibility and innovation.