(Bloomberg) -- The shares and bonds of Reliance Communications Ltd., the wireless carrier controlled by Anil Ambani, fell to a record low after the company’s credit rating was cut as the carrier struggles to compete in India’s mobile-phone market.
The price of the company’s $300 million 6.5 percent note due 2020 fell as low as 64 cents on the dollar, before recovering to 83.1 cents as of 4:19 p.m. in Hong Kong, according to Bloomberg-compiled prices. The bonds have plunged 18 cents so far this week. The shares fell as much as 9.6 percent to 25.30 rupees, the lowest since the stock began trading in 2006.
Once among India’s top mobile-phone carriers, Reliance Communications has struggled to compete as the nation’s market becomes increasingly competitive, after the entry of Reliance Jio Infocomm Ltd., launched by Anil’s brother and India’s richest man Mukesh Ambani. CARE Ratings last week cut its rating on Reliance Communications’s long-term bank facilities and non-convertible debentures, citing increased competition, high debt levels and lower cash accruals. ICRA Ltd. cut its rating earlier this month, with a negative outlook.
“The already high debt levels of RCOM coupled with lower cash accruals and imminent debt repayments increases the stress on the financial risk profile and importantly the liquidity situation of the company,” Pawan Matkari, an analyst at CARE Ratings, wrote in a report dated May 22. “The ability of the company to manage its liquidity position through refinancing in the medium term amidst negative outlook on the domestic telecom sector remains a key rating sensitivity.”
Reliance Communications has paid the half-yearly interest payment on its 6.5 percent senior secured notes on time and on the May 8 due date, it said in an exchange filing on Wednesday. The company will continue to service the debt in a timely fashion and repay it when the bonds come due on Nov. 6, 2020, it said.
Debtwire earlier reported that the company was months late in servicing its loans, and had engaged in talks with creditors to explore payment options. Reliance Communications spokesman Rajeev Narayan declined to comment on this, citing the company’s silent period ahead of its earnings’ announcement.
Reliance Communications shares were down 6.3 percent at 26.25 rupees at 1:47 p.m. in Mumbai and have dropped 23 percent so far this year.