Anil-Ambani owned telecom carrier Reliance Communications reported a smaller-than-expected 3 percent rise in quarterly profit to Rs 162 crore , weighed down by higher finance costs, in what was its second straight quarter of profit growth. Revenue rose an annual 8 percent to Rs 5,319 crore.
Gurdeep Singh, chief executive officer of Reliance Communications’ mobile business described the current market condition as a “tough competitive environment”, but was hopeful of growth in mobile data that offers relatively higher margin than voice.
In an interview with CNBC-TV 18 Singh said the company’s debt has come down by Rs 200 crore to Rs 35,600 crore and that RCom will continue to focus on unlocking value and deleveraging either through its Singapore arm Flag or Reliance Infratel.
However, a Rs 35,600 crore debt level and an 88.5 percent lower cash level at Rs 550 crore mean the company needs to either sell some assets or raise equity from investors to repay debt.
While a planned sale of Reliance Communications’ telecom tower unit expected to raise about $3 billion, has dragged on for almost two years, last month it shelved its $1 billion Singapore IPO of its undersea cable unit, dealing a blow to its efforts to ease its heavy debt load.
Singh said the management is waiting for supportive market condition and easing of prevailing global uncertainties to proceed with the offering and listing at an appropriate time in future. “It is difficult to time the market. But in order to unlock the full value of Flag Telecom assets in the best interest of our two million shareholders, I guess that as and when we see that the market conditions are improving, subsequent update will be provided to stock exchange and relevant authorities in due course of time,” he said.
“As far as our Infratel transaction is concerned, the company continues to engage with potential investors in order to complete this transaction. Once the clarity emerges on various pending regulatory issues including completion of auction process, this transaction will proceed further,” said Singh.
Ramakrishna Maruvada, a Singapore-based analyst with brokerage firm Daiwa Capital Markets, told Mint that equity offering from RCom at the right price may still find an appetite among investors, given the long-term potential of the underlying assets.
Reliance Group is planning to seek shareholders’ nod to raise funds estimated at about Rs 15,000 crore at current valuations through equity dilution of up to 25 percent in four of its companies. The companies include Reliance Communications, Reliance Power, Reliance Infrastructure and Reliance Capital.
The four firms command a cumulative market value of about Rs 60,000 crore.
The combined cash position of these firms at consolidated level more than halved to nearly Rs 4,000 crore at the end of the last fiscal 2011-12, from over Rs 8,300 crore a year ago.
Shares of Reliance Communication are currently trading 0.73 percent lower at Rs 54.15.
Competition is affecting Reliance Communications and all the incumbents, Ankita Somani, an analyst at Angel Broking told Bloomberg. “What I’m worried about is that Reliance provides a lot of free minutes in its network — there are a lot of subscribers getting those, not contributing anything to revenue.