Hi,
Yes, nothing is working in favor of ADAG companies. I knew, RCAP share price will plummet if RCOM RJIO deal does not go through but did not expect it to touch the double digit! Market capitalization of the group has shrunk to 25% of what it was 6 months ago.
One thing I am unable to comprehend. RCOM repeatedly said, it owns the responsibility to take care of the disputed past spectrum liabilities, estimated to be around 3000 crores, but it is unable to provide the bank guarantee for obvious reasons. If this was the only factor hindering the deal, then what was stopping RCOM and consortium of banks to agree upon a deal so that Rs.3000 crores out of the sale consideration is deposited in an escrow account till the dispute is resolved. Banks will stand to lose much more if the deal does not happen.
In view of present development, we need to analyze the below key issues relating to RCAP:
- Promoters have already pledged 72% of their shareholding. With the recent crash down in the share prices, even if promoters pledge 100% of their shareholding, it will not suffice. How ADA is going to manage this? Has he got sufficient value of personal assets to manage for time being?
- IF RCOM’s insolvency is resolved through a resolution plan proposed by RCOM promoters or somebody else bidding for the company, then RCAP being a unsecured financial creditor, may have to take haircut of around 80% to 90 % of its funded exposure of 1000 crore but it will be relieved from non-funded exposure of 500 crore. However, if RCOM goes for liquidation, then RCAP will lose entire 1500 crore putting additional 500 crore burden on cash flow.
- What is going to happen to Ericsson’s contempt of court plea against ADA?
- ADA had repeatedly promised to divest entire noncore investments in the books of RCAP. But year after year, noncore investments are on upward trend. Out of the total investment of 32000 crore at holding company level, 14000 crore is towards the businesses of subsidiaries and 18000 crore is exposure to other group companies. I suspect, whether he has got a concrete plan to pursue what he has promised.
- Considering the developments at Zee Entertainment, it is certain that Reliance Broadcast deal will be called off.
- First it was RNAVAL, now it is RCOM, it is evident that the promoters are no longer in a position to financially support the businesses and revive it. With the weakening credit profile of the group, how RPOWER, which needs continuous support for its ongoing projects, will raise sufficient funds going forward. RCAP has got 1500 crore exposure to RPOWER.
- At last, public perception towards the group has taken a big hit. RCAP, being into financial services, public perception plays a major role. Why will I buy an insurance from a company which is struggling for its survival?