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RCom shares fall 6% on debt repayment worries

LiveMint logoLiveMint 29-05-2017 Alekh Archana

Mumbai: Shares of Reliance Communications Ltd (RCom) fell 6% to Rs24.25 in Monday’s opening trade on worries over the company ability to repay its debt and poor March quarter financial results.

The scrip of the company has been falling since the past few sessions after rating agency after Credit Analysis and Research Ltd downgraded the credit rating on some of RCom’s long-term and short-term debt. It has fallen 29% so far this month.

Separately, Bloomberg reported that the price of the company’s $300 million 6.5% note due 2020 fell 12.5 cents on the dollar to 71.44 cents as of 10:45am in Hong Kong, according to Bloomberg-compiled prices. The bonds plunged 17 cents last week.

Today, the Economic Times reported that at least 10 Indian lenders have categorised their debt to the telco as either special mention account (SMA)- 1 or SMA-2 (overdue between 30-90 days). Some of these lenders will have to treat the account as bad loan after an fortnight, the report added.

RCom had a debt of Rs47,500 crore on its books at the end of March.

Post signing of binding documents for the Aircel and Brookfield transactions, RCom has formally advised all its lenders that it will be making repayment of an aggregate amount of Rs25,000 crore from the proceeds of these two transactions, on or before 30 September, the spokesperson of the company was quoted as saying in the report.

The firm has signed a non-binding agreement to sell its tower business to Brookfield Infrastructure Group. It has also announced a merger with Aircel Ltd.

The company has an inadequate risk profile because its cash and operating cash flow in the next months is unlikely to cover short-term debt and capital expenditure, Bloomberg reported citing a Monday note from Lucror Analytics.

Lucror will keep ‘negative’ credit bias on Reliance Communications due to intensified competition, “which will continue to pressure RCom’s revenue and earnings, and further weaken its balance sheet”.

On Saturday, RCom reported a March quarter net loss of Rs948 crore compared to a profit of Rs79 crore a year ago hurt by the intense price war unleashed by Reliance Jio Infocomm Ltd.

Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.

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