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The stock of Reliance Communications was volatile on the BSE on Monday. The stock slumped to a life-time low of Rs 74.65, but recovered to close at Rs 90.05, a fall of 3.48 per cent over the previous day's close of Rs 93.30. On the NSE, it did not witness such a swings and closed at Rs 89.7, a drop of 3.8 per cent.
ICRA placed the company's long-term fund and non-fund based capitals under watch with negative implications.
Reliance Communication's debt woes seem to be far from over. Credit rating agency ICRA on March 4 has reaffirmed the Reliance Telecom Ltd's LAA+ (pronounced as L double A plus) long-term rating assigned to the Rs 5,000-crore Non-Convertible Debenture programme and Rs 28,116 crore Long-Term Fund Based/Non-Fund Based Limits of Reliance Communications Ltd under watch with negative implications.
“The company is in an advanced stage of converting short-term debt into long-term debt,” said Mr Vikas Agarwal, Senior Vice-President, ICRA. “We are watching developments in the company closely and will again have a re-look at the ratings as and when events unfold.”
ICRA observed that proposed equity raising plans, reduction in debt levels and success in achieving improvements in its operating profitability leading to improvements in its credit metrics were key parameters that had an impact on the ratings.
Regulatory uncertainties and overall negative sentiments about the telecom sector in India may adversely affect the company's ability to deleverage its balance sheet, said the ICRA report.
Outstanding debt
High outstanding debt on the balance sheet seems to have taken its toll, said market experts.
RCom has to honour an FCCB redemption of Rs 7,000 crore spread over FY11 and FY12. The company has been trying hard to reduce debt, said experts. “RCom has three offers to sell its tower business — ranging between Rs 39 lakh a tower and Rs 45 lakh a tower,” said an analyst with an Indian brokerage. “And they will surely use the Rs 22-23 crore thus generated to repay debt. But this number could be lower if the valuation is based is based on enterprise value as the tower business itself has a Rs 10,000-crore debt on its balance sheet.”
Attempts to raise equity for debt repayment and sell the tower business had failed.
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