Indian mobile phone operator, Anil Ambani's Reliance Communications faces increasing pressure over debt obligations as it faces its first-ever annual loss. Ever since the telecom industry was shaken by the free-spending Reliance Jio, from Mukesh Ambani's Reliance Industries, things have taken a turn for the worse for the other companies in competitive market.
Stock and bond prices of Reliance Communications dipped on Monday after the announcement of a net loss of Rs 12.9 billion for the year to March, and a plunge from profits of Rs 6.6 billion the year before. The company blamed “competitive intensity on a scale never witnessed before in the country.” After a 22 per cent drop in the share price, RC said it was seeking to refinance its debt with a new consortium of lenders. A note also indicated that the company asked lenders “for waiver of certain loan covenants”. Analysts determined that it could mean Reliance has not met all the conditions of its loans and could be at risk of default if banks did not agree to waive them. However, there isn't enough information to evaluate.
Rating agency Icra's analyst, Anjan Ghosh said, “Reliance Communication's debt burden has been an issue for a long time. That problem has always been there but what's come as an additional burden is the heightened competition that has put their cash flow under pressure.”
The company's call held for analysts said it was “in discussions with lenders to obtain consent for the two transactions and to refinance scheduled payments falling due until the closure of the deals in September, to facilitate expeditious closing of both transactions in the best interests of all stakeholders.” The move comes as Reliance Communications plans to merge its wireless business with rival Aircel, and sell its mobile phone towers to Canada-based Brookfield Asset Management.
