Reliance Jio’s FY22 cash flow from operations was down 4 per cent YoY, despite 22 per cent growth in EBITDA, due to rise in receivables
Reliance Jio’s fourth-quarter performance disappointed with revenues, EBITDA and profits – all missing estimates, according to analysts. While the average revenue per user growth (ARPU) was robust and ongoing subscriber cleanup impacted subscriber additions. Jio turned free cash flow (FCF) negative on high capex and cash interest costs, which disappointed analysts.
“Reliance Jio’s 4QFY22 results missed estimates with revenues, up 20 per cent YoY missing estimates, due to lower than expected rise in ARPU. EBITDA, up 27 per cent YoY, was also below estimates due to the revenue miss and higher network costs. Profit at Rs 4170 crore, up 24 per cent YoY also missed estimates,” brokerage firm Jefferies said.
Reliance Jio’s cash flow from operations (CFO) for FY22 was down 4 per cent YoY, despite 22 per cent YoY growth in EBITDA due to a rise in receivables. The decline in CFO, along with a 12 per cent YoY increase in cash capex to ₹28,800 crore, resulting in a 63 per cent YoY decline in FCFF to ₹2,500 crore in FY22. While Jio was FCF positive in FY21, it witnessed a cash burn of ₹11,900 crore in FY22 due to a sharp 3x increase in cash interest cost to ₹13,000 crore.
“We cut our FY23-24 revenue estimates by 1-2 per cent and EBITDA estimates by 3-5 per cent to factor the miss. We lower our profit estimates by 16-18 per cent, to factor higher amortisation/interest costs due to 5G spectrum spends of ₹31,600 crore in FY23,” Jefferies added.
Intangible asset (largely spectrum) was still high at ₹28,600 crore , which means only 50 per cent of the spectrum bought in the March 2021 auction has been put to use. Analysts at ICICI Securities said amortisation will rise as the company deploys more spectrum. “Negative surprise was in the capex spend of ₹28,800 crore. This includes the ₹3,100 crore cash spend on spectrum bought in March 2021 auction, and ₹1,000 crore paid to Bharti for 800MHz band spectrum. If we exclude these spectrum payments, network capex was elevated at ₹25,700 crore. Thus, FCF was just ₹1,000 crore,” ICICI Securities said.
IIFL Securities said it expects Bharti to outperform Jio on mobile revenue growth in 4Q. “We largely maintain EBITDA for JIO but FY23/24 PAT sees 4.5 per cent-2 per cent cut considering the sharp decline in FY22 FCF on higher capex which results in higher D&A (epreciation and amortization) and interest,” IIFL said.
Jio’s parent Reliance Industries’ shares were trading down by 3 per cent at ₹2,542 on BSE at 11:50 am on Monday.