The downtrend of Anil Ambani Group company stocks continued on Wednesday with fresh trigger on concern over the Group’s debt in China and recent rating downgrade of Reliance Communication.

However, Reliance Communication clarified that half yearly interest payment on 6.5 per cent Senior Secured Notes (Bonds) issued was paid on due date on May 8.

RCom @ 10-year low

“There are no outstanding payments due on the said Bonds at present.

“The company will continue to pay interest on respective due dates and the bonds will be repaid on due date (November 6, 2020), it said. Shares of Reliance Communication fell to 10-year low of ₹26 after it lost eight per cent on Wednesday. The share has dipped 23 per cent since start of this month.

Among other Group companies, Reliance Capital and Reliance Infrastructure were down 7 per cent and 6 per cent to ₹578 and ₹494, respectively, while Reliance Power and Reliance Defence and Engineering slipped 5 per cent and 8 per cent to ₹42 and ₹56, respectively.

Rating agencies CARE and ICRA have downgraded Reliance Communication on deteriorating capital structure and huge chunk of foreign debt on its book. The company reported net loss of ₹531 crore in December quarter against net profit of ₹303 crore logged in the same period preceding year. As of March 31, 2016, debt was at ₹47,332 crore, up from ₹39,828 core, as on March 31, 2015.

Downgrading the company’s rating, CARE said the competitive landscape of the telecom industry has changed with the entry of the new operator, intense competition putting pressure on the sector profitability and delay in the deleveraging exercise of the company.

ICRA said there is persisting pressure on the company given the competitive intensity in the industry and adverse scenario has made subscriber retention difficult for all the operators.

Moody’s downgrades China

The bond market in Hong Kong was rattled on Tuesday after Moody’s downgraded the sovereign rating of China for first time in 30 years. Price of Reliance Communication’s $300 million 6.5 per cent note due 2020 fell to a low of 64 cents on the dollar, before recovering to 83.1 cents in Hong Kong.

VK Sharma, Head (Private Client Group), HDFC Securities said the sovereign rating downgrade of China would not have much impact on the outstanding debt of Indian companies in China. On the contrary, he said, it will be positive for them as they have to repay less if yuan depreciates against dollar.

However, he added the economic prospects of China appear to be bleak with the country’s debt-to-GDP ratio ballooning as the economic growth slowed to about 6.5 per cent last quarter from 9.64 per cent in 2008.

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