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Reliance Communications rallies 15% on news that Ericsson is willing to settle dues outside IBC

Reliance Communications (RCOM) has rallied 15% on news that the company and Ericsson AB are in talks to settle the outstanding debt directly than through the insolvency process. Yesterday, the NCLT had initiated insolvency proceedings against RCOM after accepting a petition from Ericsson AB regarding unpaid dues amounting to Rs1,160cr. The settlement of dues by RCOM would make sense considering that the insolvency process would result in change in ownership of the company.

This news provides some hope that RCOM would be able to avoid insolvency proceedings. Further, insolvency proceedings would also put a hold on any asset sales. This would have stopped RCOM’s asset sale to Reliance Jio. However, it remains to be seen whether the NCLT would accept this new arrangement and would roll back the insolvency proceedings. We still recommend that investors use this opportunity to exit the stock, as there is still a lot of uncertainty surrounding the future of RCOM.

Reliance Communication’s (RCOM) asset sale of its wireless spectrum, tower, fibre and MCN assets to Reliance Jio Infocomm stands halted due to the initiation of insolvency proceedings. The company reported revenue de-growth of 31.7% yoy in Q3FY18 to Rs1,144cr. Net Loss for Q3FY18 stood at Rs116cr. The stock is currently trading at 0.2x FY17 P/B.

Reliance Communications Ltd is currently trading at Rs12.10 up by Rs1.55 or 14.69% from its previous closing of Rs10.55 on the BSE.

The scrip opened at Rs10.45 and has touched a high and low of Rs12.10 and Rs10.05 respectively. So far 15,39,01,022 (NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs2,917.64cr.

The BSE group ‘A’ stock of face value Rs5 has touched a 52 week high of Rs41.77 on 29-Dec-2017 and a 52 week low of Rs9.60 on 15-Nov-2017. Last one week high and low of the scrip stood at Rs15.20 and Rs9.95 respectively. The promoters holding in the company stood at 52.96 % while Institutions and Non-Institutions held 15.14 % and 30.91 % respectively.