Shares of Reliance Communications on Monday witnessed heavy selling and plunged over 20 per cent after it reported a loss of Rs 948 crore for the fourth quarter ended March 2017. The stock fell 20.54 per cent down to settle at Rs 20.50 on the BSE. During the day, it dived 23.64 per cent to Rs 19.70 — its 52-week low. “The fall in the shares was exacerbated by reports in the media that the company’s loans have been categorised as special mention accounts by some of the banks,” said a senior market dealer.
RCom on Saturday logged a loss of Rs 948 crore for the March quarter as against a net profit of Rs 79 crore in the same period of the previous year. “The telecom sector in India has been very adversely impacted during 2016-17 by competitive intensity on a scale never witnessed before in the country,” Reliance Communications said in a statement.
Earlier this month, rating firm ICRA downgraded the long-term rating to ‘BB’ from ‘BBB’ for the Rs 5,000 crore non-convertible debenture (NCD) programme and the Rs 28,116 crore long-term fund-based/non-fund based limits (including unallocated limits) of Reliance Communications.
It also downgraded the short-term rating to ‘A4’ from ‘A3+’ for the Rs 7,314-crore short-term fund-based/non-fund based limits (including unallocated limits) and the Rs 2,000-crore commercial paper programme of Reliance Communications.
ICRA said the revision in ratings takes into account the persisting pressures on and weakening outlook of the revenue generation and profitability of the group given the heightened competitive intensity in the industry.
“The new entrant Reliance Jio Infocomm (RJio) continues to offer attractive plans even after the expiry of its free plans, which has been largely matched by the other operators. Thus there has been a material erosion in the pricing power of the industry. The adverse industry scenario has made subscriber acquisition or retention difficult for all operators. In addition, the group has sizeable debt repayment commitments during the year, refinancing of which would be a key rating sensitivity,” it said.
Concerned over the “stressed financial conditions” in the telecom sector, the Reserve Bank of India (RBI) had last month ordered the boards of banks to review the telecom sector loans and consider making provisions for standard assets in this sector at higher rates. The telecom operators, according to an Assocham-KPMG study, have an accumulated debt of around Rs 3,80,000 crore.