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RELIANCE COMMUNICATION
CMP (Rs.): 138.50 EPS (Rs.): 2.18 52 Week High : 207.80
MCap (Rs. Cr.): 28586 Book Value(Rs.): 244.66 52 Week Low : 119.50
Fundamental View :
RCom is sitting on a debt pile (net) of Rs.33,500 crore, five times its June quarter
annualized EBIDTA. Of this, a big part is repayable in next one year. As of June, of the
Rs.38,200 crore of gross debt, 44% (Rs.16,600 crore) is due within the next year.
An estimated operating cash flow for the next two financial years in the region of
Rs.11,000 crore is comforting, 3G-related capital expenditure (among others) would
mean that raising additional capital to fund expansion would become necessary. The
company, however, says its capex on the rollout of 3G services will be minimal.
Its Indian wireless business continues to report declining average revenue per minute
(ARPU) and minutes of usage (MoU) despite growing customer base. Also, a highdebt
burden restricts its ability to seek more financing to grow inorganically.
Outlook: RCom has not been able to give a convincing future growth path to investors.
However, it will benefit from implementation of the mobile number portability regime. It is
also one of only three companies to get licences in 13 of the 3G circles. While these are
positives, the major upside for the stock will happen once the deleveraging plan goes
through.
Technical View:
In the daily charts the stock is below its 25 DMA which is at 138.96. The 14 day RSI is 47.98,
MACD on daily charts is -0.59. The stock is below its 200 DMA which is at 165.38.
Recommendations:
After forming all-time low of 119.50 in Dec-2010, the stock has rallied towards 150 levels but
it still trades below short as well as long term moving averages. For a reversal of trend to
upward it has to consolidate at current levels holding on to the lows made.
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