RCom rejects Veritas stock-value report

MUMBAI, INDIA: Reliance Communications, one of India's top telecom service provider, has rejected the Veritas research report, which has assigned a Rs.15 value to RCom stock.

"The Veritas report lacks any credibility and is malafide. Orchestrated media dissemination reveals ulterior and dishonest motives. The report full of factual inaccuracies and baseless allegations is masquerading as research,” RCom official spokesperson said in a statement.

Further, “RCom is fully compliant with all prescribed accounting policies and governance norms. Attributed valuations reflect Veritas' complete lack of understanding of RCom's assets and businesses. Veritas is systematically working to destroy confidence in Indian capital markets through sensationalist reports," RCom official spokesperson added.

The Canadian independent equity research firm Veritas had released a report early this month, where it said RCom's management team is facing a significant challenge given the company's exceedingly high financial leverage along with debt repayment obligations of close to $2.2 billion.

“We believe that RCom has been scaling back its capital expenditures (capex) and has put assets on the block. However, given the weak competitive position of the Company in the Indian wireless sector, we believe that curtailed capex will be detrimental to the Company’s prospects going forward,” the report stated.  

Overall, the report revealed many concerns for RCom, including capital expenditures (capex), tower business and its monetization, accounting policies, risk management and governance practices.

Giving a major blow to RCom, the report even pointed that company reported a profit before tax profit of Rs.882 crore for FY12, but in Veritas own normalized estimate, RCom incurred a loss before tax of Rs.1529 crore.