Jio’s Sharp Rise In Expenses Indicate Payments To InVIT To Climb Up In Next 2-3 Years: Report
Reliance Jio’s expenses, excluding regulatory costs such as license fees and access charges, rose sharply by 25 per cent year-on-year to Rs 266 billion(US$3.65billion) in FY21, driven by a rise in network operating cost, indicates the telco’s payment to Infrastructure Investment Trust (InVIT) is likely to rise over the next two-three years, as per a report by ICICI Securities. This will keep pressure on incremental EBITDA margin.
The network Opex rose owing to a rise in the rental cost; power fuel cost; repair and maintenance, while other expenses (including fiber usage) were up by 178 per cent on-year to Rs 33 billion.
In contrast, employee cost and selling & distribution (S&D) cost dipped 8.6 per cent and 8.2 per cent on-year, respectively. The S&D cost includes commissions paid to Reliance Retail.
Summit Digital (tower InVIT) logged a revenue, including rental and pass-through (energy cost) of Rs 82 billion, up by 10.3 per cent.
“This was lower compared to tower InvIT document disclosure which implied rental cost increase of Rs14bn in FY21 compared to Summit revenue rise of just Rs7.7bn. Summit Digitel net debt dipped by Rs36bn to Rs333bn in FY21, but net debt to EBITDA is still high at 10.9x,” the report said. Summit Digitel contributed 45 per cent of the rental and power and fuel cost of RJio in FY21.
“Though we don’t have much detail [of fibre InVIT], other expenses within network Opex grew 178 per cent YoY to Rs38bn; a majority of it should be due to payment to fibre InvIT,” it added.
At the same time, Jio’s non-Reliance retail revenues jumped by 28.9 per cent year-on-year to Rs 71 billion in the fiscal year.
Jio’s revenue grew 28.7 per cent year-on-year to Rs 699 billion in FY21, while advanced received from Reliance Retail (adjusted for 18% GST) rose 28.6 per cent year-on-year to Rs 628 billion, it said.
Jio’s profit before tax (PBT) rose 111 per cent to Rs 161 billion in FY21; profit & loss effective tax rate was 25.3 per cent even as cash tax expense dipped 88 per cent year-on-year to Rs 1.4 billion.
