RCom shares double in just 6 days; here’s what lies ahead for Anil Ambani’s debt-laden telecom firm

Shares of Anil Dhirubhai Ambani Group’s telecom company RCom has more than doubled in the 6 days of trading. The share of Reliance Communications which emerged as a wealth destroyer and was on a continuous downslide from January 2016 has regained partially after Anil Ambani presented a revival plan on Tuesday to pull up the company from heavy debt burden. The stock of Reliance Communications surged as much as 110% to Rs 26.85 in a 6-day period from 19 December to 27 December. A massive trading volume had been observed in shares of Reliance Communications from the last 5 days. Yesterday only, when group’s Chairman Anil Ambani was addressing the press conference, about 56 crore shares exchanged hands in the day.

The stock of Reliance Communications jumped 24.88% to hit a 7-month high of Rs 26.85 on NSE while the stock rose 24.99% to Rs 26.66 on BSE on Wednesday. As at 10:55 am, more than 25 crore shares were traded on both BSE and NSE with about 22.7 crore shares on NSE alone. Following a huge 6-day spurt in the share price of Reliance Communications, the market capitalisation of the company have moved from Rs 3,534.33 crore to Rs 7,378.65 crore (at Rs 26.66 per equity share on BSE). Earlier on Tuesday, RCom shares zoomed as high as 41% in the intraday trades after Anil Ambani said the total debt of the company would be reduced by Rs 39,000 crore and the company will close all the transactions by January-March 2018.

In the Reliance Communications presser held on Tuesday, Anil Ambani said the company will exit the strategic debt restructuring plan with a zero write-off to lenders and bankers. Reliance Communications will be reducing its debt by monetising the assets of its wireless business and no part of the debt will be converted into equity under the new plan. Anil Ambani massive debt recast plan to revive Reliance Communications comes as a rescue to the company which was facing the threat of insolvency as it has defaulted to on US dollar bonds and has failed to clear dues to its domestic and foreign lenders.

RCom expects to receive about Rs 25,000 crore from the sale of these assets, while it sees a reduction in debt of another Rs 10,000 crore from the commercial development of the Dhirubhai Ambani Knowledge City campus in Navi Mumbai. The major part of the debt would be reduced via prepayments and post the debt reduction exercise, Reliance Communications debt will substantially reduce to Rs 6,000 crore from Rs 45,000 crore. The huge reduction of Rs 39,000 crore from the debt is the largest debt reduction in the history of corporate India, Anil Ambani said in the presser.

At the end of the process, the ‘new RCom’ will have a debt of just Rs 6,000 crore down from Rs 45,000 crore in October, Anil Ambani claimed, adding RCom will serve only the low-capex and high-margin enterprise space hereon. “I hope as a group and RCom, we never ever have to understand, appreciate, analyse or face an IBC, an NCLT or an SDR or any such process ever,” Anil Ambani said.

The stock of Reliance Communications had been surging since last week on the buzz of Mukesh Ambani buying the assets of RCom. Following which on Wednesday, 20 December 2017, RCom zoomed as high as 45% in the late afternoon trades before settling up 35.23% at Rs 17.27.

On 15 November 2017, most shares of the Reliance ADAG tumbled sharply amid heavy trading volumes in the late afternoon trade, with the Anil Ambani group’s Reliance Communications shares falling to single digits for the first time ever. Shares of Reliance Communications fell 17% to hit an all-new record low of Rs 9.6.