Chart Beat: Reliance Jio’s free cash flow slips into negative territory in FY24

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₹15,200 crore. This compares with a positive figure of ₹6,700 crore during FY23. Not without reason.

The negative free cash flow in FY24 was due to a sharp rise in cash interest costs to ₹13,600 crore and 60% year-on-year rise in network capex to ₹41,000 crore, pointed out analysts from Jefferies India. ROCEs remained at sub-6% levels due to higher invested capital base, wrote Jefferies analysts in a report on 22 April, adding, “ROCE may improve as fresh spectrum investment is monetized over the next 1-2 years." ROCE is short for return on capital employed. To be sure, Jio was expected to report a negative free cash flow for FY24.

Meanwhile, Jio’s March quarter financial results were broadly satisfying with year-on-year revenue growth at 11% aided by strong subscriber additions. Arpu or average revenue per user was sequentially flat at ₹182. Heading into the new financial year, “Tariff hike, ramp-up of FWA (air fiber) and potential IPOs are the key triggers in FY25," according to Kotak Institutional Equities.

“With Vi’s fund raise, subscriber market share gains could moderate to some extent," said Kotak’s analysts in the results review report. The brokerage believes there is likely to be an offset from more frequent tariff hikes in the next few years. Post the March quarter and FY24 results, shares of Jio's parent Reliance Industries were trading lower in early hours on Tuesday.