Anil firms reap peace dividend
Stocks of Reliance Anil Ambani group were amongst the top performers on Tuesday, up 2-10 per cent during the day. Reliance Communications, which announced a major restructuring of its tower arm on Monday evening, was up 3.49 per cent on the BSE.
The fortunes of the entire pack, which had been going through a bear run in the preceding year, seems to be on the mend. The key stocks of the group are up 30-50 per cent since May 23, when the two Ambani brothers scrapped their no-compete agreement — signalling a truce.
The market capitalisation of the four key ADAG firms has increased by Rs 28,700 crore — more than $6 bn over the period. The upturn would be welcome for shareholders who had seen values of their holdings erode as much as 60 per cent in some cases.
In case of RNRL, Reliance Power and Reliance Infrastructure, part of the recovery in stock prices can be traced to the announcement on May 23. The joint announcement of the siblings had said that the no-compete agreement is being scrapped except in the area of gas based power.
This indicated there was some hope for ADAG’s gas fired power project. In case of Reliance Communications, some of the gain following the announcement was because investors felt the company will have more headroom for M&A activity.
RCom’s bid for MTN had been stymied by RIL in 2008. Since then, RCom has announced a fund raising and restructuring. Both of these steps are critical for the company that is facing a high level of debt and intense competition. RCom had a debt of almost Rs 20,000 crore at the end of FY10 — which would have gone up as the company borrowed to pay for its 3G spectrum licences.
Amongst the various group firms, most brokers continue to remain negative on RCom — because telecom sector is expected to see a rough ride. Reliance Power is also not fancied much — as the company still doesn’t have completed projects at hand. Reliance Infrastructure however, has overweight ratings from a number of brokers including Morgan Stanley and JP Morgan.
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