RCom shares down 20% on negative rating of bond

MUMBAI: Reliance Communications Ltd (RCom) led a rout in Anil Ambani’s Reliance Group stocks on Wednesday, as investor concerns rose over the debt levels of these firms.

RCom shares plunged to a record low of ₹25.30 before gaining some ground to close at ₹25.85, down 7.7% from their previous close.

India’s benchmark index, Sensex, closed down 0.21%. Other group stocks did not fare much better.

Reliance Defence and Engineering Ltd fell 7.88% while Reliance Infrastructure Ltd shares were down 6.46%.

RCom shares have now lost 21.8% in the last 10 trading sessions.

On May 5, ratings agency Icra Ltd downgraded RCom’s debt and subsequently, on May 19, Care Ltd also cut its ratings on several debt instruments, citing the competitive landscape in the telecom industry.

The rating agency added that RCom’s high debt levels, coupled with lower cash accruals and imminent repayment obligations, had increased stress on its financial risk profile, leading to a stretched liquidity profile and deteriorating debt coverage indicators.

The fall in RCom shares on Wednesday was accentuated by a sharp fall in the prices of its bonds in Hong Kong.

That prompted a clarification by the firm to stock exchanges that it has made timely halfyearly payments on these notes and would continue to do so, which consequently led to the bonds erasing their losses in due course.

On Tuesday, Debtwire, a financial intelligence service, ran a story that RCom was exploring fresh payment options with creditors and has asked them to wait for payment until it completes the spin-off of its wireless services business and the separate sale of its tower business, Bloomberg reported.

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

RCom spokesman Rajeev Narayan declined to comment, citing a silent period ahead of the company’s earnings’ announcement.

Officials at two Indian stateowned lenders that have exposure to RCom debt, said the company has been servicing debt regularly. The officials cited above spoke on condition of anonymity.

Still, investors are worried about debt at other Reliance Group companies, said Vinod Nair, head of research, Geojit Financial Services Ltd.