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Deutsche Bank has raised its investment recommendation on software firm Rolta India bonds to buy from hold a day after the company denied allegations made by short-seller Glaucus Research about fabricated capital expenditures.
The short-seller report had triggered a sharp sell-off in Rolta's shares and bonds and Deutsche said it expects the bonds due 2019 to recover to mid-90s from lows struck on Thursday. Overnight, the 2019s fell to 85 cents on the dollar.
Deutsche said it agreed with the company's response that Glaucus had made factual errors in its report and the report had very little new information.
"Issues such as persistent negative FCF (free cash flows) have been well known for a while, as the company was in the middle of a heavy capex cycle, which is now over, and in fact, it finally turned slightly free cash flow positive in the last quarter," Deutsche said.
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