Reliance Communications with right moves
Reliance Communications Ventures Ltd (RCoVL) is in the news for various reasons. The company will replace Tata Power in the Sensex, the 30 share benchmark index. RCoVL has also approved a proposal to sponsor a secondary market offering of Global/American Depository Receipts (GDR/ADRs) at a premium to the market price, for an amount upto $1 billion (approximately Rs 4,500 crore), in one or more tranches. As of now, the company has a market capitalisation of Rs 41,000 crore.
If one looks at the market capitalisation of Sensex companies, this figure is closer to the market capitalisation of Tata Motors and Larsen & Toubro which are in the range of Rs 35,000-37,000 crore. It would be the second telecom company that will be a part of the Sensex. Bharti Tele-Ventures, which has a market capitalisation of around Rs 79,000 crore ranks among the top 10 companies when seen in terms of market capitalisation. There are 18 companies in the Sensex that have a market capitalisation lower than RCoVL. Since its listing on March 6, 2006, the company has shown an appreciation of 17% and is traded at a current market price of Rs 340. The Sensex has appreciated by 15.30% during the same period. On the other hand, Tata Power which has a market capitalisation of Rs 11,100 crore has actually shown a fall by 2.44%. Says Ambareesh Baliga, of Karvy Stock Broking, "Specially when the market is bullish, the inclusion of RCoVL as a part of Sensex 30 scrips would have a positive impact on the company. There should be a further demand for the shares as those who are tracking the Sensex are bound to buy the scrip." RCoVL, the flagship company in the group, is the holding company of CDMA-based telecom company Reliance Infocomm Ltd, GSM-based telecom company Reliance Telecom Ltd, bandwidth company Flag Telecom Ltd and Reliance Communication Infrastructure Ltd. There are only three companies listed in the telecom sector on the Indian bourses. Out of the three Tata Teleservices focuses on just Maharashtra and Gujarat. So that leaves only Bharti Tele-Ventures and RCoVL with a Pan-India presence. Increase in FII investment limit from 26% to 74% will have a positive impact on the RCoVL stock. Investors will surely look at diversifying their holding in the telecom sector.
RCoVL has a market share of a little over 19%, compared to 22% of Bharti Tele-Ventures. Bharti had 17.4 million users at the end of January 2006, followed by RCoVL with 15.5 million. RCoVL is presently trading at a discount to Bharti Tele-Ventures. The reasons for which are lower ARPU and lower operating margins. The other reason being lack of information and disclosures in case of RCoVL as compared to Bharti Tele-Ventures due to its recent listing. But this is a short-term scenario and, eventually, more information will help the market to know more about the business of RCoVL. The company is in the business of volumes whereas Bharti operates at higher margins. For the quarter ended March 2006, the company has reported a 42% jump in net profit at Rs 440 crore, whereas the EBITDA stood at Rs 1,042 crore, a growth of 23%. The EBITDA margin of the wireless business expanded from 32% to 36%, led by record customer acquisitions, economies of scale, cost efficiencies and productivity gains. The broadband business achieved a revenue growth of 54%, and strong EBITDA margin expansion from 20% to 31% sequentially. The company has the total assets of nearly Rs 26,000 crore and net worth of Rs 11,742 crore. The company's wireless business has achieved the highest-ever acquisition of 3.2 million customers in a single quarter, with the total base crossing a record 20 million customers as of March 2006.The market is expecting the company to post an EPS of Rs 12 for the next year, which also indicates that the stock is available at around 28 times to its 2006-07 earnings.
If one looks at the market capitalisation of Sensex companies, this figure is closer to the market capitalisation of Tata Motors and Larsen & Toubro which are in the range of Rs 35,000-37,000 crore. It would be the second telecom company that will be a part of the Sensex. Bharti Tele-Ventures, which has a market capitalisation of around Rs 79,000 crore ranks among the top 10 companies when seen in terms of market capitalisation. There are 18 companies in the Sensex that have a market capitalisation lower than RCoVL. Since its listing on March 6, 2006, the company has shown an appreciation of 17% and is traded at a current market price of Rs 340. The Sensex has appreciated by 15.30% during the same period. On the other hand, Tata Power which has a market capitalisation of Rs 11,100 crore has actually shown a fall by 2.44%. Says Ambareesh Baliga, of Karvy Stock Broking, "Specially when the market is bullish, the inclusion of RCoVL as a part of Sensex 30 scrips would have a positive impact on the company. There should be a further demand for the shares as those who are tracking the Sensex are bound to buy the scrip." RCoVL, the flagship company in the group, is the holding company of CDMA-based telecom company Reliance Infocomm Ltd, GSM-based telecom company Reliance Telecom Ltd, bandwidth company Flag Telecom Ltd and Reliance Communication Infrastructure Ltd. There are only three companies listed in the telecom sector on the Indian bourses. Out of the three Tata Teleservices focuses on just Maharashtra and Gujarat. So that leaves only Bharti Tele-Ventures and RCoVL with a Pan-India presence. Increase in FII investment limit from 26% to 74% will have a positive impact on the RCoVL stock. Investors will surely look at diversifying their holding in the telecom sector.
RCoVL has a market share of a little over 19%, compared to 22% of Bharti Tele-Ventures. Bharti had 17.4 million users at the end of January 2006, followed by RCoVL with 15.5 million. RCoVL is presently trading at a discount to Bharti Tele-Ventures. The reasons for which are lower ARPU and lower operating margins. The other reason being lack of information and disclosures in case of RCoVL as compared to Bharti Tele-Ventures due to its recent listing. But this is a short-term scenario and, eventually, more information will help the market to know more about the business of RCoVL. The company is in the business of volumes whereas Bharti operates at higher margins. For the quarter ended March 2006, the company has reported a 42% jump in net profit at Rs 440 crore, whereas the EBITDA stood at Rs 1,042 crore, a growth of 23%. The EBITDA margin of the wireless business expanded from 32% to 36%, led by record customer acquisitions, economies of scale, cost efficiencies and productivity gains. The broadband business achieved a revenue growth of 54%, and strong EBITDA margin expansion from 20% to 31% sequentially. The company has the total assets of nearly Rs 26,000 crore and net worth of Rs 11,742 crore. The company's wireless business has achieved the highest-ever acquisition of 3.2 million customers in a single quarter, with the total base crossing a record 20 million customers as of March 2006.The market is expecting the company to post an EPS of Rs 12 for the next year, which also indicates that the stock is available at around 28 times to its 2006-07 earnings.
posted by Unknown | 8:48 PM
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