Canadian Stock Market Research form Veritas known for its really bold research where required has come out openly against Anil Ambani mismanaged Reliance Communications yet again with a SELL rating and a stock price target of Rs 15. Since their last SELL call, Reliance Communications stock is down 32%.
Veritas Report Talks on the following points,
- Reliance Infratel – Telecom Tower Company – RCom is valuing its tower company at $4.2 Bn while Veritas has assigned it an EV value of just $2.36 Bn. My Take – Veritas is wrong here as it is not an easy task to setup a Telecom Infrastructure Company in India with 10% Inflation. Considering the ballpark figure is Rs 3 Mn / Tower and this is definitely in line with conservative estimates of RCom. Even on Cost Replacement Basis, we find RCom’s Tower company Valuation at $4 Bn.
- Accounting policies of Reliance – I agree; totally opaque and has lot of potential to present cooked up books of accounts as the second generation management has inherited it from parent 😉
- Reliance Global / Flag Telecom IPO Truths Uncovered – Reliance’s Netherlands subsidiary has pledged Assets of Flag for $500 Mn Loan and thus proceeds from the IPO will be used to repay the Debt.
- Poor Governance Standards – Well their Executives sat in Tihar Jail to protect the mastermind of 2G Wireless Spectrum Scam, what is left to say ?
The report concludes with a SELL Rating and a potential stock price target of Rs 15 making it for Mukesh Ambani to gobble the company.