Anil Ambani group firms’ stocks dip on debt worries

Shares of Anil Ambani group companies dropped between five and eight per cent on Wednesday. The sell-off was on concerns of whether the group would be able to repay the high debt to banks. The fear was triggered after Reliance Communications’ overseas bond plunged 30 per cent after a cut in credit rating and reports of delay in interest payment. Shares of other group companies also came under selling pressure. Reliance Infrastructure dropped 6.5 per cent, Reliance Defence fell 7.9 per cent, Reliance Power declined 5.4 per cent and Reliance Capital by 6.7 per cent.

Shares of Anil Ambani group companies dropped between five and eight per cent on Wednesday. The sell-off was on concerns of whether the group would be able to repay the high debt to banks. The fear was triggered after Reliance Communications’ (RCom’s) overseas bond plunged 30 per cent after a cut in credit rating and reports of delay in interest payment.

According to Bloomberg, the company’s $300 million 6.5 per cent note, due 2020, has plunged 36 cents to a dollar so far this week. The share fell 7.7 per cent on Wednesday, extending this week’s fall to 15 per cent. According to data from Capitaline, total debt dues for the five listed companies stood at ~1.25 lakh crore at the end of FY17.

Last week, CARE Ratings had cut its rating on RCom’s long-term bank facilities and non-convertible debentures, citing increased competition, high debt levels and lower cash accruals. Reliance Comm Reliance Power Reliance Infra Reliance Defence Reliance Capital Shares price drop on May 24 (%) Total debt (~cr) 32,371 29,935 21,603 8,337 33,059 ICRA, too, cut its rating earlier this month, with a negative outlook, citing weakening prospects for revenue generation and profitability.

According to a report, RCom was late in servicing its loans and had engaged in talks with creditors on payment options. The company, in a clarification to stock exchanges, said it had made the interest payments on time.