The Hindu Business Line : Reliance Info bad debts at 16 pc of service revenues

RELIANCE Infocomm's provisioning for bad debts for the year 2003-2004 amounted to 16 per cent of service revenues, among the highest in the industry, according to telecom experts.

The company provisioned Rs 436 crore for bad debts, while service revenues for the year amounted to Rs 2,707 crore.

"This lends credence to the rumours in the market that many customers were cheating the company by disappearing, not paying up, not even receiving bills, and so on," said an analyst with a brokerage firm.

The company attributed its bad debts to the Monsoon Hungama offer of last year, which fetched one million applications within the first ten days of its launch. "This unprecedented response gave rise to logistics, billing and collection problems," said the Chairman of the Reliance group, Mr Mukesh Ambani, at the Reliance Industries' annual general meeting here.

He said the company is now "on top of the situation" and that Reliance Infocomm team would put these problems behind it very soon.

The provisioning for bad debts pared down Reliance Infocomm's cash profit from Rs 596 crore to Rs 160 crore. Depreciation and amortisation amounted to Rs 550 crore, resulting in a net loss of Rs 390 crore for the year.

The impact of the infocomm business on the consolidated results of Reliance Industries for the year ended March 2004 is a loss of Rs 265 crore.

Analysts said Reliance Infocomm's bad debts as a portion of revenues are among the highest in the industry.

Bharti Tele-Ventures', with revenues of around Rs 3,200 crore for the year, had reported bad debts of only 3 per cent to 4 per cent, said an analyst. "This is because of their initial aggressive launch when customer verification was not very stringent and before their systems still had teething problems," he said.

But since Reliance Infocomm had insured the handsets that it was selling on instalment basis to its customers, its bad debts could be much less than it actually seems, said Mr Animesh Singh, analyst with brokerage firm SSKI.