Icra puts RCom, two arms on rating watch on debt pile-up

Putting the debt-laden telecommunications operations of Reliance Communications (RCom) on watch with “negative implications”, credit rating agency Icra Ltd has red-flagged the health of nearly $8 billion debt on the books of RCom and two of its subsidiaries.

Icra placed the long-term rating of Rs33,116 crore debt on the books of Reliance Communications, Rs1,000 crore of Reliance Infratel, and the Rs8,67 crore of Reliance Telecom under “watch with negative implications.”

“We were waiting for certain developments such as equity infusion and conversion of short-term debt to long-term debt,” said Vikas Agarwal of Icra. “Those have not taken place yet, and hence the watch list with negative implications.”

In October, Icra had raised concerns on some of the debt, when the agency labeled them with a “negative outlook.”

An RCom spokesperson declined to comment.

“The company had stated its plans to convert a significant portion of its short-term debt to long-term debt to reduce its high repayment burden in the short to medium term,” Icra’s rating alert on Friday said.

RCom has been looking to bring in a strategic investor into Infratel, its telecom tower operations company with about 50,000 towers under management, but has not been able to do it yet.

It also had plans to list its tower arm to raise funds, but that has also not materialised yet.

The latest rating action from Icra also takes “into consideration regulatory uncertainties and overall negative sentiments about the telecom sector in India, which, in Icra’s opinion, may adversely affect the company’s ability to deleverage its balance sheet.”

For the quarter ended December, RCom had profits of `504.6 crore on revenues of Rs5,004 crore. However, during the same period, free cash flow generated by the company from its operating activities stood at only Rs285.2 crore.

Market analysts have also raised concerns about the fall in RCom’s key operational indices such as average revenue per subscriber, and average realised rate per minute and total minutes of usage.