Reliance Communications: Investors on hold for ever

Reliance Communications (RCom) is one of the stocks that are probably most widely held by retail/HNI investors. They should give up hope now

From a high of Rs844 that it hit in January 2008, Reliance Communications (RCom) has crashed to below Rs75 in March 2011. A lot of retail investors are holding shares in this stock, bought at different levels, hoping that it would come back some day. For it to reach its previous high, the stock would have to rally by 673%. This is a pipe dream.

Given the fact that it belongs to the media-hyped ADAG group, high competition in the telecom markets, regulatory probes which never seems to end and poor financial performance, the chances of RCom coming back to anywhere near its previous high is remote.

If one is holding RCom in anticipation that it will come back to its previous highs and rise some 673%, only a miracle could possibly lead to a 673% rise in a company's profitability whose profits over the last trailing 12 months have fallen by over 54%.

Moreover, it is perhaps one of the most talked-about stocks across all the business news channels and there exists a support and resistance theory at every Rs15-Rs20 level, just trapping investors at every fall and compelling them to average more and more.

Why RCom Should Be Shunned

• Starting at the same level as Bharti Airtel, RCom's net profit has gone up by only around 30% in the past four years compared to a more than a 100% rise for Bharti.

• The reason for the fall in RCom's share price, which has fallen a lot faster than profits, is that the company has being in continuous news for a number of years in relation to some or the other probe. Whether it be the 2G scam probe, tax evasion probe from the I-T Department, probe from the DoT (Department of Telecommunications) for misrepresenting its revenues, etc.

A Google search with the keywords "RCom, probe and news" will give you a lot of interesting hits.

• The company has complained regarding bear cartels which are "hammering its share price" and often cries foul, approaching SEBI (the Securities and Exchange Board of India) and other regulatory authorities. However, one should understand that even that market is far superior to any bull or bear cartels and cannot allow a good company's stock to go down from Rs844 to Rs75 unless there is some structural problem in the company.

• In terms of corporate governance, ADAG group's stocks are by far among the worst in India, and this leads to absolutely no interest by foreign or domestic institutions in RCom. Their holding over the last three years have also come down and are expected to come down with every rally in shares.

• Its total debt in its books have grown up from around Rs17,000 crore to around Rs30,000 crore as on March 2010 (excludes debt for 3G spectrum).

• Return on Capital Employed (ROCE) of a pathetic 8% for FY10 in the same industry where the biggest competitor Bharti Airtel operates at an ROCE of over 28%.

• With Mobile Number Portability coming in, most of its CDMA customers who were somewhat stuck with an ageing technology and somewhat disappointing network and customer service can now switch to a plethora of GSM service providers.

To summarise, RCom is like a dead stock in an industry whose growth is gone. It's better to avoid such a stock; the market offers far better investment opportunities rather than buying or even continuing to hold RCom.




6 years ago

The worst is over for the company. It will out perform all the indices and front line stocks, including It majors, in FY12. ACCUMULATE at CMP.

S Rajendran Steno

6 years ago

Reliance Comm is one of the companies I had invested it earlier. But I have realised that Reliance whether it is under the elder sibling, Mukesh or the younger Anil, ultimately it does not make any difference. The companies are run in a rather amateurish fashion, always there is a high personnel turnover and total lack of transparency in any decision. There is absolutely not even a token presence of corporate ethics in any of these companies probably taking a leaf out of their late father's style of bribing and cajoling the various power centres of the Government of the day. It is high time that we investors wake up to the shoddy manner of running these companies and the Government of India should do well to ensure close scrutiny of both the brothers' companies who are upto no good.

Narendra Doshi

6 years ago

Mr. Rahul,
What about repurcussions of Mukesh's likely reentry in telecom and the tower business etc ?
At what price do you recommend complete selling, irrespective of the extent of loss ?
What is your estimated high price over one & two years from now, keeping aside the high of Rs 844/-.


Rahul Sontalia

In Reply to Narendra Doshi 6 years ago

Irrespective of Mukesh's entering into telecom, irrespective of the current price and what the price might be over the next two years, I personally believe that one should not own a bad business, and if owns should get rid of it as soon as possible.. Rcom as per my view should not be held as market offers far better oppurtunities.

India-SA match on emerges as biggest online streamed cricket match in the country

The sports online channel recorded 3 million individual live streams exceeding 43 Gbps of video data during the match, which, it says, is a record in India

New Delhi: ESPN-STAR has set a new record in India of a maximum 3 million individual live streams delivered during the India-South Africa group match of the ongoing cricket World Cup, the media company said today.

The live streaming on exceeded 43 Gbps of video data at the peak across India during that match, which was played in Nagpur on 12 March 2011. This is also a new record in India by the Akamai global content delivery network.

The company said that the live web streaming of the ICC Cricket World Cup has been very popular. Since it started on 15 February 2011 with the warm-up game between India and New Zealand and through the first 42 matches, it has already reached a huge 55 million views across the globe to 17 million unique users.

The India matches, before the quater-finals, accounted for 10.7 million streams peaking at 3 million for the India-South Africa game. has generated more than 175 million page views in the period from 15 February 2011 to 23 March 2011. On the India-South Africa match day, delivered an impressive 12.7 million page views. The site has seen over 20 million unique users in this period.

"ESPN-STAR Sports has leveraged the power of broadcast, digital and mobile platforms to deliver India fans the ICC Cricket World Cup 2011, wherever, whenever, on the best screen available," said Aloke Malik, managing director, ESPN Software India. "The response to live streaming of ICC Cricket World Cup 2011 on has been amazing."

Akamai's HD Network was designed to allow content owners and publishers the ability to deliver a personalised and interactive consumer experience through advanced features, such as DVR, multi-camera angle switching, and adaptive bitrate streaming technology.


Ambareesh Baliga joins Way2Wealth as chief operating officer

Ambareesh Baliga will head the institutional, wealth management and the research division (institutional & retail advisory) of Way2Wealth

Ambareesh Baliga has taken over as chief operating officer at Way2Wealth. He will head the institutional, wealth management and the research division (institutional & retail advisory). Mr Baliga will be based out of Mumbai.

Mr Baliga has over 25 years of experience in the stock markets. Prior to joining Way2wealth he was with renowned institutions like Karvy and Kotak group.
Mr Ambareesh has varied experience in different facets of financial services such as corporate finance, investment banking, car finance, marketing and distribution of various financial products. He was part of Karvy's core management group and involved in formulating various business strategies. He set up their PCG business for HNI's in 2001, their institutional equity group in 2003, their PMS Desk, research and their institutional business. Karvy's foray into mutual funds was also spearheaded by Mr Baliga.




4 years ago

on his advice on bartronics many people have been trapped. the stock is now at 25/ and recommended at 200. Mr. ambaresh come and accept your responsiblity for making people fools.

ravinder kumar

5 years ago

bartronic is one of his worst prediction. he had chosen this stock around 200 and waiting for good performance until stock touched the level of 65.


5 years ago

Mr Ambaresh should be careful while giving comments on the stock because I had held 25000 shares of DLF at 132 and was told by this man to exist at 150 and accordingly I booked profit. Then the stock went to 400 within 2 months. What a pity

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