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Saturday, March 04, 2006

RIL has reduced financial flexibility of RCoVL

The Anil Dhirubhai Ambani Group, ADAG, has said that actions by Reliance Industries, RIL, when Reliance Communication Ventures, RCoVL, was under its control have “reduced the financial flexibility” of the Anil Ambani telecom holding company, reports The Economic Times.

In the information memorandum submitted to the stock exchanges ahead of its listing next week, RCoVL said that in the agreement between Mukesh and Anil Ambani last June, RIL had agreed to transfer cash of Rs 3,100 crore (Rs 31 billion) to RCoVL as part of the demerger.

However, it transferred just Rs 372.08 crore (Rs 3.72 billion) when the demerger happened in February this year, RCoVL said, adding that the balance Rs 2,727.9 crore (Rs 27.27 billion) was given in the form of deep discount bonds that Reliance Communications Infrastructure, RCIL, had issued to RIL.

“This has reduced the financial flexibility of RCoVL. The action was taken by RIL (when RCoVL was under its control) and without the knowledge of Shri Anil Ambani’s representative on the RCoVL board,” the memorandum says.

However, industry sources said that the fact that deep discount bonds were issued by RCIL means that the money was paid to the company and that money, in the form of the bonds, has been transferred to the ADAG company.

RCoVL now says that it will take appropriate steps but cautioned that there was no certainty that RIL’s actions will be reversed.

RCoVL is the telecom holding company of the ADAG group. It came into the ADAG fold following the family settlement between the Ambani brothers in June last year. It owns large stakes in Reliance Infocomm, the wireless CDMA service provider, RCIL, which owns the infrastructure backbone and Reliance Telecom, the GSM service provider. RCoVL‘s shares will be listed on the stock exchanges on March 6.

Meanwhile, Reliance Infocomm has been shown to have posted a consolidated net profit of Rs 25 crore (Rs 250 million) for the nine months ended December on sales of Rs 6,813.70 crore (Rs 68.13 billion).

Figures for the year-ago period are not provided, but the company posted a big loss of Rs 2,343.5 crore (Rs 23.43 billion) for the full year ended March ‘05, versus a loss of Rs 548.40 crore (Rs 5.48 billion) in ‘03-04. Earnings before interest, tax, depreciation and amortisation for the nine months ended December was Rs 1,070 crore (Rs 10.70 billion).

The company had a net debt of Rs 1,962.3 crore (Rs 19.62 billion) for the nine months and Rs 5,238.9 crore (Rs 52.38 billion) for the full year of ‘04-05. RCIL, the fibre optic backbone firm, has posted a consolidated net loss of Rs 75 crore (Rs 750 million) for the nine months ended December on net sales of Rs 1,369.5 crore (Rs 13.69 billion). The company had made a bigger loss of Rs 1,915.3 crore (Rs 19.15 billion) for the full year of ‘04-05.

The company had net debt of Rs 1,564.8 crore (Rs 15.64 billion) for the nine months up from Rs 878.2 crore (Rs 8.78 billion) for the full year of ‘04-05.

Both RCIL and RIC recently wrote off over Rs 4,487.1 crore (Rs 44.87 billion) in bad debts and inventory losses.

The information memorandum says that both RIC and RCIL have accumulated losses of Rs 4,890.8 crore (Rs 48.90 billion) as of December ‘05 and warned that some of the operating companies may continue to “incur losses for the foreseeable future”.

RCIL holds an internet service provider licence and also provides internet data collection centres. Its other activities include R World, the data application platform and R Connect the wireless internet access service.

Reliance Telecom, the GSM arm of RCVL, posted a consolidated net profit of Rs 92 crore (Rs 920 million) on sales of Rs 470.8 crore (Rs 4.70 billion) in the nine months ended December. The company had a net profit of Rs 86.9 crore (Rs 869 million) on sales of Rs 452.9 crore (Rs 4.52 billion) for the whole year ended March ‘05.

The company had net debt of Rs 273.5 crore (Rs 2.73 billion) for the whole of last year and Rs 174.8 crore (Rs 1.74 billion) for the nine months ended December.


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