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RCom shares fall nearly 20% in nine sessions on negative rating of overseas bond

LiveMint logoLiveMint 24-05-2017 Ravindra N. Sonavane

Mumbai: Shares of Reliance Communications (RCom) fell in eight out of nine sessions, falling nearly 20% in this period to hit a record low, as its overseas bond continued to plummet after rating agencies ICRA and CARE cut their rating on its debt on worries of its dollar-denominated debt.

The stock touched a record low of Rs26.60 a share and fell as much as 5% in intraday trade. So far this year, it has fallen 7.15%.

At 11.28am, it was trading at Rs26.90 on the BSE, down 4% from its previous close, while India’s benchmark Sensex index rose 0.38% to 30,482.03 points.

Its group companies were also trading lower. Reliance Infrastructure Ltd fell 1%, Reliance Capital Ltd 1.5%, Reliance Power Ltd 0.8% and Reliance Defence and Engineering Ltd 1.2%.

RCom’s $300 million bond, which has a coupon rate of 6.5%, fell 18 cents on the dollar to 64.7 cents as of 12.25pm in Hong Kong, according to Bloomberg data. It has plunged 36 cents so far this week. The bond is due for maturity in June 2020.

On 19 May, CARE revised its long-term facility rating to CARE BB from CARE A and short-term facility rating to CARE A4 from CARE A2+ with credit watch, with developing implications.

CARE stated that the revision in the rating factors come in the competitive landscape of the telecom industry with the entry of the new operator, intense competition putting pressure on the sector profitability, and delay in the deleveraging exercise of the company.

On 5 May, ICRA revised its long-term rating to BB from BBB with negative outlook and short-term rating on fund based/non fund based limits and commercial papers of the company from A3+ to A4.

ICRA has stated the reasons for this revision as persisting pressure and weakening outlook of revenue generation and profitability of the company, given the competitive intensity in the industry. The adverse industry scenario has made subscriber acquisition/retention difficult for all the operators

Earlier, Debtwire reported that RCom has engaged in talks with its bank creditors to explore payment options. According to the Debtwire report, the company has asked banks to wait for payment until it completes the spin-off of its wireless services business and the separate sale of its tower business.

The company will announce its March quarter earnings on 27 May. According to estimates of four Bloomberg analysts, the company may post consolidated loss of Rs886.10 crore, while revenues will be at Rs4,633.10 crore. As of September 2016, the company has total consolidated loans of Rs32,371 crore.

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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