The Markets are continuing to cheer the stock impact of Tuesdays mega announcement by debt-ridden Reliance Communications Ltd. After gaining 11 per cent yesterday,R-Com surged nearly 2 per cent on Wednesday. This despite some brokerages,including Kotak Securities,emphatically retaining their sell rating on R-Com on the grounds that the Rs 1,200 crore-deal with RIL-unit Reliance Jio does not materially change things for the Anil Ambani firm,given the massive debt of over Rs 37,000 crore on R-Coms books.
The broader trigger for the sentiment boost for R-Com seems to be the potential ripple effects of Tuesdays deal that signals a rapprochement between chairman Anil Ambani with his elder brother Mukesh Ambani,which would have many fold affects on the stock and the company in future. Indications are that there will be a series of announcements coming through in the due course.
The other important facet to Tuesdays deal is that for both Reliance Jio and R-Com,the deal is mutually non-exclusive,meaning that while R-Com would be free to offer fibre optics to other firms as well,Reliance Jio can avail of other firms fibre infra. Morgan Stanley has reiterated equal weight rating on R-Com with price target set at Rs 56 after the deal,with the brokerage firm calling it a win-win for both companies. RIL will avoid huge capex as it will get access to readily available telecom infrastructure,while for R-Com,it will result in optimal utilisation of its existing untapped infrastructure, the Morgan Stanley note said.
Anil is a senior editor based in New Delhi.
anil.s@expressindia.com
