Active Stocks
Tue Mar 19 2024 13:21:10
  1. Tata Consultancy Services share price
  2. 4,013.45 -3.17%
  1. Tata Steel share price
  2. 149.80 0.13%
  1. Bharti Airtel share price
  2. 1,232.00 0.57%
  1. Power Grid Corporation Of India share price
  2. 259.75 -1.98%
  1. ITC share price
  2. 409.65 -1.86%
Business News/ Market / Mark-to-market/  RCom results marginally disappointing
BackBack

RCom results marginally disappointing

The company’s December quarter results weren’t disastrous, as the free fall in the shares suggests

While it’s a mystery why Reliance Communications’ shares fell sharply on Thursday, the sharp rise of over 60% since September was equally baffling, considering that core concerns on the company’s high leverage have still not been addressed. (While it’s a mystery why Reliance Communications’ shares fell sharply on Thursday, the sharp rise of over 60% since September was equally baffling, considering that core concerns on the company’s high leverage have still not been addressed.)Premium
While it’s a mystery why Reliance Communications’ shares fell sharply on Thursday, the sharp rise of over 60% since September was equally baffling, considering that core concerns on the company’s high leverage have still not been addressed.
(While it’s a mystery why Reliance Communications’ shares fell sharply on Thursday, the sharp rise of over 60% since September was equally baffling, considering that core concerns on the company’s high leverage have still not been addressed.)

Reliance Communications Ltd’s shares fell by 9.14% on Thursday, but it had little to do with it announcing results on Wednesday evening. It was one among a number of stocks, including IRB Infrastructure Developers Ltd and Hexaware Technologies Ltd, that fell sharply in the last hour of trading for no evident reason.

The company’s December quarter results weren’t disastrous, as the free fall in the shares suggests, but they weren’t impressive either. Revenues grew by 2.2% sequentially and profit before tax fell by 13.7% owing to a slight drop in margins and an increase in interest costs. Reported profit was lower than analysts’ estimates.

In the wireless segment, Reliance Communications reported a 0.7 paise or a 1.62% sequential increase in revenue per minute, which came as a positive surprise. There has been talk of reduced competitive intensity and increased pricing power for a while now, and the increase in Reliance’s revenue per minute supports this view. Having said that, it must be noted that this hasn’t resulted in any increase in profitability. Besides, despite being a seasonally strong quarter, total volumes measured by the number of minutes carried on the company’s network grew by just 0.49% sequentially.

The company sounded very positive on the outlook for tariffs. It said on a call with analysts that it expects revenue per minute to increase by 2-3 paise in the near-term, thanks to the pricing measures taken in September and October as well as in early January. This means a further increase of 1.3-2.3 paise in revenue per minute from current levels.

As one analyst with a domestic institutional brokerage firm puts it, this isn’t earth shattering, especially considering that a gradual increase in tariffs was already being factored in. Besides, as pointed out in this column on Wednesday, telecom companies have to cope with a concurrent increase in operational costs such as diesel, and financial and amortization costs related to regulatory charges.

While it’s a mystery why Reliance Communications’ shares fell sharply on Thursday, the sharp rise of over 60% since September was equally baffling, considering that core concerns on the company’s high leverage have still not been addressed. The company’s net debt increased again last quarter to 37,360.6 crore. From a valuation perspective, therefore, Thursday’s fall has helped bring in a much-needed correction.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 24 Jan 2013, 05:50 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App