Reliance Communications has announced a tie-up to re-finance FCCB redemption of USD1.18b due on March 1, 2012. Duration of loan is 7 years at an interest of ~5%. The funding would be provided by ICBC, CDB, EXIM and other Chinese banks.
- The re-financing removes an immediate overhang, but structural issues remain unaddressed, viz, continued market share loss and high leverage (net debt of ~INR320b, ~5x net debt/annualized EBITDA).
- RCom stock is up ~50% in the past one month. At CMP of INR90, the stock trades at EV/EBITDA of 7.5x FY12 and 5.8x FY13. Maintain Neutral.
- The re-financing removes an immediate overhang, but structural issues remain unaddressed, viz, continued market share loss and high leverage (net debt of ~INR320b, ~5x net debt/annualized EBITDA).
- RCom stock is up ~50% in the past one month. At CMP of INR90, the stock trades at EV/EBITDA of 7.5x FY12 and 5.8x FY13. Maintain Neutral.
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