Widely read:
Reliance Communications has risen quite a lot in the last few weeks. What is driving the stock's price so high?
- Ajit Chaddha -
Reliance Communications' (RCom) stock has jumped nearly 45 per cent between June 1 and June 28. Two pieces of news drove the stock price up last month. Firstly, the 26 per cent stake sale by RCom is likely to be at a premium and is expected to bring additional funds into the company. In the recent 3G auctions, RCom won 13 circles and had to pay a fee of Rs 8,585 crore for the spectrum to the government. This has further increased the company's debt to Rs 33,332 crore. The stake sale is an effort to reduce debt.
Secondly, in an effort to infuse additional cash into the company, RCom announced a deal to sell off its tower arm, Reliance Infratel, to GTL Infrastructure. The combined entity is expected to become the largest independent tower company with over 50,000 towers from Reliance Infratel and 30,000 towers from GTL Infrastructure. Reliance Infratel is expected to command a valuation of Rs 25,000-Rs 30,000 crore for its 50,000 towers.
Both these deals are expected to reduce the company's high debt level. It is these developments that caused the price of the stock to rise.
This article was originally published on August 03, 2010.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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