Reliance Communications (RCom), the mobile telephony arm of the Anil Ambani-led Reliance Group, which is already saddled with debt, will have to borrow up to Rs 6,000 crore more over the next one year to fund the cost of spectrum it acquired through auctions, credit rating agency Moody’s said in a report on Friday.
The report says that RCom will have to pay around Rs 4,300 crore to the government for acquiring the spectrum it has bid for and will have to raise Rs 5,000-6,000 crore for this purpose (along with funding other capex).
RCom has been looking to monetise assets, but it hasn’t made much headway.
“We expect RCom to opt for a deferred payment schedule, which will limit its upfront cash outflow at around Rs 1,100 crore. Nonetheless, we will treat the deferred portion of the spectrum payments as debt, which will keep leverage at the higher end of our tolerance for the Ba3 rating,” the Moody’s report said. As on December 31, RCom had a net debt of Rs 50,302 crore, according to Bloomberg.
For the nine months ended December 31, RCom had a turnover of Rs 16,076 crore and a net profit of Rs 486 crore in the same period.
“Upfront payments of Rs 1,100 crore will further strain RCom’s liquidity profile, in the absence of any asset sales. As on December 31, the company had cash and cash equivalents (including short-term investments) of Rs 1,900 crore against short-term debt maturities of Rs 7,000 crore,” the report added. “Cash flow from operations will not be sufficient to meet funding needs, including capex and spectrum payments, over the next 12-18 months. RCom will need to raise Rs 5,000-6,000 crore over the next 12 months, but given the company’s banking relationships we do not consider the refinancing risk to be substantial.”