Public issue at an appropriate time 'to unlock full value'

Reliance Communications (RCom) has put its proposed $1-1.5 billion initial public offering (IPO) on hold, due to global uncertainties.

RCom had earlier announced that it was planning to list its subsea telecommunications network business, Flag Telecom, on the Singapore Exchange.

The listing was supposed to take place through the Global Telecommunications Infrastructure Trust (GTIT). On July 5, GTIT filed a copy of the preliminary prospectus with the Monetary Authority of Singapore.

The telecom company said it would look at listing at an appropriate time in future to “unlock the full value of the Flag Telecom assets” in the interest of shareholders.

Trying ease debt

The telecom company had planned to use the proceeds of the IPO to repay some of its debts. As of March, RCom has been trying to ease a debt of about $7 billion. In the past, it has been unsuccessful in raising money by selling assets.

Flag Telecom was acquired by the then undivided Reliance Group for about Rs 1,000 crore in 2003. However, it later came under the portfolio of the Anil Ambani-led companies.

For fiscal ending March 2012, the company reported a net profit of Rs 156 crore and revenue of Rs 11,110 crore.

Rating blues

Recently, the rating agency ICRA has downgraded Reliance Communication’s long term rating from ‘stable’ to ‘negative’. ICRA is concerned about the high level of debt — Rs 37,000 crore, at the end of last year — and the “challenging operating environment.”

“Though the funds so raised (Singapore IPO) would help the company de-leverage its balance sheet, the debt level would continue to be high for the current rating category,” ICRA said in that report.

The stock closed at Rs 63.75, down 0.31 per cent on the BSE.

(This article was published on July 20, 2012)
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