RCom risky, but hold on to group stocks: Experts
The major worry for investors is Reliance Communications has debt of Rs 40,000 crore.
Last Updated: May 30, 2017, 10.26 AM ISTOriginal: May 30, 2017, 10.19 AM IST
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“Reliance Capital has several high growth businesses such as asset management, insurance, consumer finance and broking, while Reliance Infra could look at lowering its debt by raising money through InvIT, which could create value for its shareholders,” said a fund manager with a domestic broking house.
As per the sum of the parts (SOTP) analysis by ICICI Direct, the per share value of Reliance Capital is Rs 740 — much higher than the current price of Rs 539 — indicating the merit in holding the stock for longer term. For Reliance Infra, SOTP analysis by IDFC Securities shows value per share at Rs 683, again higher than the current market price of Rs 452.
The major worry for investors is Reliance Communications, which has a market capitalisation of Rs 5,000 crore and a debt of Rs 40,000 crore. It is in a difficult spot as it has been losing market share in the telecom space due to tough competition from players with deep pockets.
Shares of these companies fell sharply on Monday, reflecting the Street’s uneasiness over whether Reliance Communications will be able to pay back its lenders. While RCom lost 20.5 per cent to end the day at Rs 20.5, Reliance Capital and Reliance Infra, too, fell 8.9 per cent and 10.8 per cent to close at Rs 539 and Rs 452, respectively. “There is a trust deficit in the group and hence, the market punished all companies on Monday without looking at the fundamentals,” explained Alok Ranjan, head of research, Way2 Wealth.
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