New Delhi: Anil Ambani group firm Reliance Communication’s huge debt and liabilities may come in the way of it getting cheaper debt that may be needed to fund its Rs24,000 crore investment plans, Kotak securities has cautioned in a report but the company has contested the findings.
The company has an aggressive capital expenditure plan worth Rs24,000 crore and it excludes the requirement for 3G auctions and roll outs, the report said and cautioned that with the deteriorating return ratios each quarter, it will have to show significant execution capabilities to turn around the low capital productivity levels.
The company, however, said that it has comfortable debt-equity ratio and its high cash flows give it sufficient leverage to fund its Rs15,000 crore investment planned in 2009-10.
“Our balance sheet size has increased following the implementation of a significant capex plan. Current net debt to equity ratio is 0.64:1, which is highly leveraged. We have Rs8,000 crore on our balance sheet and estimated annual operating cash flows of Rs9,000-10,000 crore,” an RCom spokesperson said when asked to comment on the report.
Kotak Securities is of the view that the net realisations are expected to be lower despite robust subscriber additions to continue in near term as the new subscribers are unlikely to contribute substantially to the revenues and margins.