New Revival Plan by Rcom; What should you do now?

Rcom

Highlights
  • No conversion of debt to equity will take place.
  • Payment of Rs 39,000 crore Debt by January-March 2017.
  • Expected enterprise value of New B2B Rcom at Rs 15,000 crore.

New Rivival Plan by Rcom’s Board….

Today, once again Rcom or Chairman of ADAG Mr.Anil Ambani presented a new revival plan. It has been almost 7 months for the company to operate under a SDR. But with the announcement made today, no debt will now be converted into equity. Company also reported that it will close all the transactions by January-March of 2018.

Rcom’s shares zoom over 40 percent intraday….

This conference held today had a great impact on stock price. In the morning trade, stock was quoting around Rs 17.30 in comparison of previous close of Rs 16.30. But after the initial news of Press conference, stock started riding on a great gain. And after announcements made, more than 5 crore shares trading took place within a minutes which in result end up the stock with a gain of around 30 percent. Stock has now been closed at Rs 21.50 which is more than double to Rs 9.70 low made recently by stock.

New revival plan includes same monetisation method as said earlier. But few things which gave a booster dose to stock includes decision of no debt into equity conversion, settlement with China Bank and other secured lenders and payment of debt between January to March 2018. Company’s chairman also told media that Credit suisse has valued new Rcom at a valuation of Rs 15,000 crore.

No Conversion of Debt into Equity; Positive or Negative?

Earlier, many investors including me also were expecting that this sudden rise in stock is due to Conversion of debt into equity which could take place soon. But as rcom has announced today, there will be no conversion. This action taken by promoter of company is very positive for investors. Before, i was feeling that Mr.Ambani has now left no great interest in its Telecom Firm. And therefore, they had decided to give majority stake to banks through SDR. But now, after today’s announcements, i think Chairman of company really see some wealth creation in the company and have now some confidence about its future outlook. Therefore, those who are buying shares of Rcom are also confident about the company. And that’s why stock is running like a Big Bull.

Conclusion

Although, you need to remember one thing that Assets sale has not been done yet. Company will complete all the transactions before April of 2018. However, the last thing that we need to know is that how much stock could run in next 2-5 months. At current valuations, it is very clear that stock still has great potential upside. So therefore, holding your shares would be the best option. In upside i think first level where Short-term investors can try to book all of their profit is Rs 50. Maybe, stock could even take a dip at present levels. But with such a great momentum in stock and present valuations, possibility of having level of Rs 50 in next few months or maybe weeks is much higher.


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