Shares in free fall, RCom tries to reassure investors

MUMBAI: Reliance Communication Ltd (RCom) is seeking approvals from its bankers to sell its telecom towers business and merge its wireless business with Aircel Ltd, steps which will allow the company to pare debt, its management said in an investor call Monday.

These deals are likely to be completed by September and RCom has sought refinancing for some of its debt in the interim, said Gurdeep Singh, chief executive officer of the wireless business.

The management assurance came on a day the RCom stock fell 20.5% to ₹20.50, a record low, after investors grew jittery about the firm’s debt repayment ability.

“RCom has formally advised all its lenders that it will be making repayment of an aggregate amount of ₹25,000 crore from proceeds of these two transactions on or before September 30. The paid amount will cover not only all scheduled repayments, but also include substantial prepayments to all lenders on a pro rata basis,” the management said during the call.

The sale of RCom’s tower assets to Brookfield Asset Management Group will yield ₹11,000 crore while the company expects to transfer ₹14,000 of debt to the merged entity.

RCom had debt of ₹47,332 crore on its books at the end of March, compared to ₹39,828 crore in the previous fiscal year.

“The Brookfield deal is critical for debt servicing,” said an analyst with a credit rating agency on the condition of anonymity.

“Given the current financials, even managing short-term cash looks difficult without any external cash infusion. Till the end of the third quarter, the company somewhat managed repayments but now it looks difficult because there is hardly any cash accrual given the Jio onslaught.”