RCom: Crossed lines

The stock of RCom tanked about 11 per cent on Tuesday to a 52-week low of ₹16.75 as the company’s merger plan with Aircel was called off.

Besides the merger, the company had planned to sell 51 per cent stake in its tower business to Brookfield Infrastructure for ₹11,000 crore. However, the deal valuation is likely to be lower since this now excludes Aircel’s towers and the tenancy ratio will come down. The company expects about ₹10,000 crore through sale of its real-estate assets in Mumbai though reports indicate it could be valued less.

RCom also plans to monetise its spectrum, through sharing and trading agreements with other players. However, some of the bands of spectrum held by the company are likely to expire in 2021 and high debt situation could prevent it from renewing the license.

Bottomline: The leverage of the company could still remain high and intense competition may put further pressure on its margins.