Reliance Communications to live with high debt, interest costs for a few quarters more
Reliance Communications' fourth quarter earnings, will fail to offer solace to investors who have seen the stock beaten down.
By Parul Bhatnagar, ET Bureau | Updated:
Reliance Communications' fourth quarter earnings, announced after market hours on Monday, will fail to offer solace to investors who have seen the stock beaten down on the bourses over the past two years amid intensifying tariff war and high debt. Its debt stood at more than Rs 32,000 crore at the end of March. What offers some comfort to investors is the Rs 8,700-crore loan facility that R-Comm signed with China Development Bank. The company completed drawing down of Rs 6,000 crore towards refinancing of 3G spectrum fees on Friday.
Refinancing short-term rupee borrowings will result in substantial interest costs savings of almost 500 crore per year. Besides, its debt maturity profile has increased up to 10 years. Following the announcement on Friday, the stock, which had fallen nearly 16% over the past one month, rose about 6% to 85.
The company plans to raise the balance Rs 2,700 crore over the next few months and utilise the money to import telecom equipments. R-Comm reported 71% quarter-on-quarter jump in revenue in January-March to Rs 7,876 crore, after posting fall in revenues over the past few quarters. However, net profit fell 65% sequentially to 167 crore during the quarter due to lower earnings across segments including wireless, global and broadband.
Its wireless business continues to report fall in average revenue per user (ARPU) and minutes of usage (MoU) despite growing customer base. During the quarter, the company reported 21% sequential rise in net customer addition in wireless business. However, MoU fell 4% sequentially to 241 per minute per subscriber. ARPU dropped 3.6% to 107 during the period. According to latest data from telecom regulator Trai, R-Comm had the least number of active subscribers in the quarter compared with peers. High debt burden and interest cost are concerns for the coming quarters. At the current market price of Rs 87.50, the stock trades at 13.4 times its earnings for the trailing twelve months.
Refinancing short-term rupee borrowings will result in substantial interest costs savings of almost 500 crore per year. Besides, its debt maturity profile has increased up to 10 years. Following the announcement on Friday, the stock, which had fallen nearly 16% over the past one month, rose about 6% to 85.
The company plans to raise the balance Rs 2,700 crore over the next few months and utilise the money to import telecom equipments. R-Comm reported 71% quarter-on-quarter jump in revenue in January-March to Rs 7,876 crore, after posting fall in revenues over the past few quarters. However, net profit fell 65% sequentially to 167 crore during the quarter due to lower earnings across segments including wireless, global and broadband.
Its wireless business continues to report fall in average revenue per user (ARPU) and minutes of usage (MoU) despite growing customer base. During the quarter, the company reported 21% sequential rise in net customer addition in wireless business. However, MoU fell 4% sequentially to 241 per minute per subscriber. ARPU dropped 3.6% to 107 during the period. According to latest data from telecom regulator Trai, R-Comm had the least number of active subscribers in the quarter compared with peers. High debt burden and interest cost are concerns for the coming quarters. At the current market price of Rs 87.50, the stock trades at 13.4 times its earnings for the trailing twelve months.
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