Billionaire Mukesh Ambani's Reliance Jio would post a loss of Rs 15,000 crore in the current fiscal year ending March 31 if the cost of subsidised mobile phones it sells is included and accounts are prepared using standard depreciation metrics, brokerage Bernstein said Tuesday.
The loss would be larger than rivals Bharti Airtel and Vodafone Idea, it said.
"Jio's disclosed income statements show a positive, albeit small, return on invested capital (about 3.1 per cent), but as we have pointed out in the past this relies on 'non-standard' depreciation metrics and all the handset subsidies being booked through Reliance Retail," Bernstein said in a report.
After considering these factors, Jio may see "a potential loss of Rs 15,000 crore in FY 2019. Far worse than Bharti's or Vodafone Idea's," it said.
Jio uses a 'unit of production' method for its wireless network costs that includes spectrum and capex causing costs to scale up with higher utilisation of network capacity. Bharti Airtel and Idea Cellular use the more prevalent straight-line method, where costs decrease over the life of the asset.
Jio had previously defended its D&A policy saying "the expected pattern of consumption of the expected future economic benefits of the relevant assets is monitored periodically, and depreciation amount computed accordingly in line with the Accounting Standards."