Reliance Communication’s - Are you buying it?

There has been a lot of interest in Reliance Communication’s plans to reduce debt by 25,000 Cr. this year. The stock is up 10% since August 14, and investors seem to be buying into the turnaround story – Be it by merger, sale of assets, or financial restructuring.

Here are some numbers to think about:

Finance Costs: 3,500 Cr.

EBITDA = 5,392 Cr.

EBIT = 1,171 Cr.

EV = 57,973 (Debt) + 5,811 (Market Cap) – 1,300 (Cash) – 257 (Financial Investments) = 62,191 Cr.

EV/EBITDA = 11.53

Debt / Equity = 9.97

Now, with a 25,000 Cr. debt reduction (from sale of profitable business), 32,973 Cr. Debt will be left. Assuming a 40% loss of their revenue (equal to proportion of business sold to pay off the targeted 25,000 Cr. debt), no further deterioration in credit quality, and no further deterioration in operating margin:

Current Price = 23.50

EBITDA after sale of biz = Rs. 32,35 Cr.

EV after sale of biz = Rs. 37,191 Cr.

EV / EBITDA after sale of biz =11.49

Debt / Equity after sale of biz = 32,973 / 5,811 = 5.67

Okay, so it seems like the company will significantly deleverage its books, BUT these numbers do not include any operating liabilities, loss of revenue from transition, loss of synergy/integration, regulatory hurdles, interest accrued from non-payment of dues, increased competition, margin squeeze, business restructuring costs, legal fees, and potential for dilution of equity to fund future operations. Moreover, it assumes that the revenue contributed by the healthy portion of the business, which will soon be off the balance sheet, is equal in proportion to that from the portion of the business retained.

Evaluating the business in the rosiest possible scenario, the one that Mr. Anil Ambani is selling, it will still take more than 10 years for the company to redeem its debt on an EBITDA basis with the leftover business.

Let’s ‘get-real’ for a moment though – With the weak competitive, operating, bargaining, and financial position of the business, it’s highly unlikely that investors will ever see a positive bottom-line sans a (significant) dilution of their equity. So, the simple question is – Are you buying it?

Tips for Successful Day Trading Online

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Founded in 2005, ABans Group has grown from being a trading house to a dynamic and diversified business group. We provide expertise in Broking Services, Merchant Banking, Non-Banking Financial Dealings, Jewellery manufacturing and Realty and Infrastructure. It is a comprehensive Financial Services and Solution Provider,which aims to provide an end-to-end financial solution to its clients.

Insights into Commodity Trading

Commodities are actual physical goods like gold, soybeans, corn and crude oil. These can be sold and bought physically in future market and are interchangeable with other goods. Commodities are traded in the same way as financial futures but the only difference is that they have physical settlement and asset quality is taken into consideration unlike financial futures. With respect to commodities, futures are contracts that are traded at a future exchange like MCX and NCDEX in India. There is a fixed delivery month for each contract and future exchange sets a standard size for each futures contract.

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Founded in 2005, ABans Group has grown from being a trading house to a dynamic and diversified business group. We provide expertise in Broking Services, Merchant Banking, Non-Banking Financial Dealings, Jewellery manufacturing and Realty and Infrastructure. It is a comprehensive Financial Services and Solution Provider,which aims to provide an end-to-end financial solution to its clients.

Important Information about Commodity Market

It is not every ones cup of tea to make money in commodities market by trading on an intra-day basis. It is possible that the commodity going up trend will start showing down trend and you will never know about what has happened. Thus intra-day trader should be familiar with the latest news strangling around the commodity market so that he/she can take quick as well as witty judgement while trading.

Commodities have two segments – MCX (Multi Commodity Exchange) and NCDEX (National Commodity and Derivatives Exchange Ltd.). These are traded in big amount and their prices as well as quality levels are universally exercisable. MCX includes Crude Oil, Silver, Gold and copper metals like Aluminum Ingot, Electrolytic Cathode etc. NCDEX includes agriculture produce like Cashew, Crude Palm Oil, Cotton Oil Cake, Coffee etc.

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Most of the traders access the public platform because they get in touch with other traders for trading advices and also they retrieve knowledge about commodities that can make benefits. Our suggestion is to follow tips or advices from learning and proficient technical analysts of ABans Group as you need to have a reliable source that you are confident of.

Founded in 2005, ABans Group has grown from being a trading house to a dynamic and diversified business group. We provide expertise in Broking Services, Merchant Banking, Non-Banking Financial Dealings, Jewellery manufacturing and Realty and Infrastructure. It is a comprehensive Financial Services and Solution Provider,which aims to provide an end-to-end financial solution to its clients.