Eye on the market: Thumbs up for RCom

After a long spell of underperformance, Anil Ambani's Reliance Communications (better known as RCom) has bounced back.

Its stock price hit its 52-week high of Rs 119.90 following the news that the company had signed a Rs 12,000-crore deal with Reliance Jio, the telecom arm of elder brother Mukesh Ambani's Reliance Industries, to lease up to 45,000 mobile towers to the latter over their lifetime.
 
However, at the end of the day, the stock closed at Rs 116.40, down 1.40 per cent from its close on Thursday at Rs 118.05.
 
The RCom stock has been in focus for the past three months following expectations of positive developments in the company. Since its low of Rs 59.55 on February 28 this year, its stock price has doubled. In the same period, the Bombay Stock Exchange gained only 3 per cent.
 
The RCom stock had been battered following the huge debts it had incurred and its lowered revenues. The current debt of the company is around Rs 37,000-38,000 crore.

But this is expected to go down to Rs 26,000 crore following the Flag deal (the company plans to sell its under seas cable business) and the Rs 5,000 crore deal with Reliance Jio to provide inter-city and intra-city network for the latter. With today's deal the debt is expected to come down further.
 
In end-May, the company also increased tariff rates by 33 per cent. Indeed, in the last one year, the company has nearly doubled its tariff. It has also tied-up with companies like Aircel and Loop to provide GSM services to its customers where RCom itself is not present.
 
The stock has just recovered after languishing for more than two years.

Another reason for its underperformance was also the ban on accessing the capital market imposed on Anil Ambani. Now that the ban has been history for over a year, it will be interesting to see if RCom is one-off achievement, or the other companies of Anil Ambani, many of which are also limping, recover just as spectacularly.