Hathway cables: Got 254% return on my shares till now! (Thank you Jio)

Hathway Cable and Datacom Ltd is currently the best performing stock in my portfolio! I invested in the company when its price was less than Rs. 15 and quite recently, it hit the Rs. 53 mark – returning 254% in the process. I still haven’t sold any of my shares yet- for good reason!

My Average PriceRs. 14.92
LTP Rs. 52.85
P&L Percent254.01%
As on July 2020

In this article, I will describe how I decided to invest in Hathway Datacom and why I am still holding on to my shares. It might not turn out to be Ruchi Soya but in the long run, there could be better returns to be had!

Hathway Cable & Datacom Ltd- About the Company

Hathway is a cable and broadband provider based out of Mumbai. They have a presence in most major cities like Mumbai, Delhi, Chennai, Kolkata, Bangalore and Hyderabad, and caters to over 11 million customers. Currently, they have a broadband customer base of 430,000 with the potential to reach 1.2 million more!

In 2018, Reliance Industries acquired 51.34% stake in Hathway for ₹2,940 crores (US$410 million) held through multiple subsidiaries, chief of which is Jio Content Distribution Holdings Pvt LTD. In 2019, Reliance additionally acquired 20.61% stakes in the company to make their total 71.95%. Currently, promoters hold 94.09% of the entire company!

More recently, Reliance brought together its media, cable, and broadband networks wherein Hathway, along with numerous other Reliance subsidiaries, became part of the Network 18 Group!

PromoterHolding
Jio platforms71.95%
Rajan Raheja Group13.71%
Hathway Investments Pvt Ltd6.36%
Spur Cable and Datacom2.16%

I invested in Hathway on a whim!

Upstox pro website with Hathway stock

I use Upstox (This is my referral link) for investing in Stock

Back when I started investing in March (yes, I am new to this), Hathway was never part of my initial picking. Like everyone who had spare savings, I too wanted to invest some of it in stock. Frankly, it was not the money but an eagerness to learn about the stock market that pushed me into it! So I decided to put half of what I had in ‘sure-shots’ and the rest in penny stocks! The latter brought me to Hathway.

The company had weak financials, and returns on Equity, Capital and Asset was negative. While these are sure shot red flags, three things stood out:

  1. P/B ratio
  2. Promoter holding
  3. Reliance

First, at Rs. 15 the Price to Book Ratio was less than 1 and even now, it’s hovering around 2. This is good! Second, 94+ of the company is held by promoters- 70% of which was Reliance under the Jio platforms. This was excellent!

I felt that Reliance must have some huge plans for the company and might even bring Hathway under their own ‘Jio Fiber’ network in the future. This is bound to improve share prices. However, this was something which I saw in the far future, not within three months of my buying!

Hathway Cables and Jio Platform Investments

At the time of my investment, Reliance was a company in debt and their stakes in Hathway didn’t really mean anything if the couldn’t come out of it. And come out of it they did!

First, it was Facebook with a 5700 million investment in ‘Jio Platforms’ for 9.90% stakes. This itself was massive an no one really expected it to be just a start! In an unprecedented turn of events, Silver Lake- a global leader in technology took up 2.1% stakes in the company next, followed by ten others. Google was the cherry on top with $4500 million investment for 7.73% of the platform!

After these investments, the share price of Reliance Industries as well as all its digital subsidiaries went up. Hathway and Den Network were the most benefited – returning more than 3 times their pre-investment value.

So, why am I still holding on to my shares?

Future of Hathway in Jio: This could be huge!

blue violet lines

Jio started a digital revolution in India which brought a large part of the country’s populace online and made data accessible! Now that this has been achieved, the company is taking a holistic approach to the digital world. Reliance wants Jio to be present in almost every node of an Indian’s online presence. This might be through the internet they access, new technologies like 5G and AI, online shopping, mobile application, video streaming, and much, much more! We will discuss the problems of internet monopoly in a different article, however, as an investor this is huge!

Buying fiber and cable networks like Hathway, Den, and Network 18 form a small but important part of this strategy- last-mile connectivity!

I believe that there is more profit in store for these stocks but above that, I want to be part of the Jio journey. I am sold on the future that the company envisions for itself and the potential that holds. This is why I am holding the stock for the long run!

All said, the current P/E ratio of the company is 200 and this is definitely a huge red flag. Without Reliance themselves conforming a proper vision for Hathway no one can be sure of how the company will turn out. So, as always, excise caution while investing.

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Disclaimer: This is what I felt about Hathway Cables and Datacom. Returns are not guaranteed and I advise not to invest on the basis of this article alone.
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