The company is 58% owned by the Reliance Group's subsidiaries.
Special Features : None
Structure
Rating : Ba3 (Moody’s)/BB- (Fitch)
Yield guidance : 6.5%
Profile of Reliance Communication ( RCOMIN )
· RCOMIN is Indian telco that provides mobile services, broadband,
and undersea cable business.
· 4th largest integrated mobile operator in India
· 80% of revenue from India, 20% outside of India.
· RCOMIN is 58% owned by Reliance Group related companies.
India wireless Industry
· 2nd largest wireless market after China.
· High growth rate over the last 5 year ( compounded annual growth rate of 21% )
· Relatively low penetration rate of 71% ( versus China at 89% ).
Bonds are secured by:
· Plant and machinery including tower assets and optic fiber cables.
· Telecom licenses.
· Pledge over shares of its interest in unlisted RCIL and RTL.
Strength and weakness according to the prospectus and rating company:
Strength
Indian wireless market is a high growth market.
Fall in oil price is positive for Indian telcos, which spend close to 4.5% of their mobile
revenues on diesel in order to keep their base stations running in the face of acute power scarcity.
Management has commited to deleverage in the next 2 years.
They are in the process of looking to sell GCX.
Weakness
· Uncertain regulatory environment.
· Forex risk due to substantial amount of USD debt.
· Higher leverage than peers such as Bharti Airtel and Idea Cellular.
Comparables : Indian High Yield Bonds
GCX LTD ( Global Cloud Exchange ) 7% 8/1/2019B2 ,YTW=6.24% (callable on 8/1/16@105) ,now@102.79
GCX currently operates five subsea cable networks. Currently wholly owned by Reliance Communications,
but is in talks to sell 50% to a strategic investor ( possibly Citic Telecom )
Delhi Airport 6.125% 2/3/2022 Ba1, BB YTW=5.11% now@105.75
Delhi Airport is the largest and busiest airport in India.
Ownership : GMR 54%, Airport Authority India 26%, Malaysia Airport 10%, Fraport 10%.
Comments from Bondsupermart 2/15/16
Indian offshore bond market
The Indian offshore bond market is a fairly concise segment, with approximately 118 outstanding USD-denominated bonds issued by Indian corporates, representing around USD45 billion worth of bond principal (at the time of writing). Amongst these, just 89 constitute bond issues of USD100m or more, while 63 issues representing USD41 billion are included in the popular JPM Asia Credit Core index – this brings India's representation within the index to around 11.3% (as of 4 February 2016), ranking it behind South Korea, China, Indonesia, the Philippines and Hong Kong.
Within the concise universe of the more liquid India offshore bonds, yields currently span between 2.3% and 32.4% (distressed yields in the case of more troubled issuers like Rolta, Vedanta Resources and JSW Steel), offering investors a wide selection of bonds catering to different risk-reward profiles. For investors seeking stronger yields in the India bond market, Reliance Communications' RCOMIN 6.500% 06Nov2020 Corp (USD) may be an interesting option. Reliance Communications Ltd is a leading India-based telecommunication firm – the company is listed on the National Stock Exchange of India, and currently sports a market capitalisation of around USD2.1 billion (as of 5 February 2016).
In this article, we suggest three reasons why investors should take a closer look at Reliance Communications' RCOMIN 6.500% 06Nov2020 Corp (USD).
1. One of the highest-yielding India offshore bonds
While yields in the India offshore bond market (within our defined liquid universe of India offshore bonds) span between 2.3% and 32.4% (as of 5 Feb 16), the median yield is a mere 3.8%, a function of the large number of investment-grade paper in the segment. Some of the largest names (by bond principal size) in the segment include investment-grade (land ower-yielding) credit from Bharti Airtel, Reliance Holdings as well as ICICI Bank, weighing down on yields for the overall segment. Outside of the more troubled spectre of the Indian bond market (for the likes of Rolta, Vedanta Resources and JSW Steel), Reliance Communications' RCOMIN 6.500% 06Nov2020 Corp (USD) are amongst the highest-yielding bonds in the market – the bonds are currently quoted at around 102.25 (ask), representing a decent yield-to-maturity of 5.94%. This higher yield is also a function of the non-investment grade rating for the bonds, which are rated Ba3 and BB- by Moody's and Fitch Ratings respectively.
2. Strong shareholders
Reliance Communication Ltd is part of the larger Reliance Group (the Reliance Anil Dhirubhai Ambani Group), which consists of Reliance Capital, Reliance Communications, Reliance Infrastructure, Reliance Entertainment and Reliance Power. The Reliance Group was formed in 2005 following the split of the larger Reliance entity into Reliance Industries (focusing on oil refining) and the Reliance Anil Dhirubhai Ambani Group of companies (focusing on telecommunications, power, entertainment and financial services). As of 31 December 2015, 58.85% of the company was owned by Anil Dhirubhai Ambani and his associated companies, which are also the company's promoters/controlling shareholders.
3. Resilient business
Unlike its non-investment grade peers in the India bond market (Vedanta Resources, JSW Steel, Tata Steel) which are in the more volatile resources-related sector, Reliance Communication operates in the more defensive telecommunication services business, and is one of the leading integrated private sector communication service providers in India; the firm counts companies like Bharti Airtel, Idea Cellular and Tata Communications as its peers. As shown in Chart 1, the firm's EBITA has been fairly resilient, allowing for interest coverage (EBITDA to Interest Expense) to remain at a fairly reasonable 2.62x (as of end-Dec 15), suggesting that the company is well-positioned to continue servicing debt obligations.
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101.875/102.875
回覆刪除Markets | Fri Jan 22, 2016 1:36pm EST
回覆刪除Reliance Communications third-quarter profit falls on lower margins
Indian telecoms company Reliance Communications Ltd posted a 14.9 percent drop in quarterly profit on Friday, as cut-throat competition for customers in a crowded mobile phone market squeezed margins.
India is the world's second-biggest market for mobile phone users behind China, but tough competition has resulted in wafer-thin profit margins for carriers in a market that has one of the cheapest call rates in the world.
Debt-burdened Reliance Communications (RCom), controlled by billionaire CEO Anil Ambani, undertook a series of deals during the December quarter to raise money and expand coverage. These included a spectrum swap with elder brother Mukesh Ambani's Reliance Jio for high-speed 4G services.
RCom, India's fourth-biggest wireless telecommunications carrier, also signed a non-binding pact in December to sell its mobile phone masts business to a group of companies led by buyout firm TPG Capital Management LP.
For its fiscal third quarter ended Dec. 31, the company reported a net profit of 1.71 billion rupees ($25.29 million) against 2.01 billion rupees a year earlier. That beat analysts' average forecast of 1.65 billion rupees.
Third-quarter revenue fell 3.1 percent year-on-year to 52.98 billion rupees.
In November, RCom agreed to buy Sistema's Indian mobile phone business with a view to getting access to the Russian conglomerate's precious bandwidth that services the high-speed 4G network.
($1 = 67.6150 Indian rupees)
(Reporting by Himank Sharma; Editing by David Goodman and Mark Potter)
Fitch Affirms Reliance Communications' at 'BB-'; Outlook Stable
回覆刪除March 02 (Fitch) Fitch Ratings has affirmed India-based telecoms service provider Reliance Communications Limited's (Rcom) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) of 'BB-'. The Outlook is Stable. Fitch has simultaneously affirmed the 'BB-' rating on Rcom's USD300m 6.5% senior secured notes due 2020. KEY RATING DRIVERS Deleveraging is Likely: The affirmation factors in Rcom's commitment to deleverage in a timely manner by using the proceeds from the sale of its tower business by its subsidiary, Reliance Infratel Ltd (Infratel). Management has committed to repay a part of its USD6.1bn of debt and to achieve a target debt/EBITDA of below 3.0x by end-March 2017.
We would likely downgrade the rating if the company is unable to demonstrate in a timely manner that it has the ability to pay down debt such that FFO-adjusted net leverage will fall to below 4.5x. Excluding any non-core asset sales, Rcom's FFO-adjusted net leverage could remain high at around 5.5x, as we expect it to generate limited FCF due to stagnant EBITDA and a rise in capex requirements during the financial year ending 31 March 2017 (FY17). The company has insufficient liquidity to meet its obligations due in FY17, and will have to rely on banks to refinance facilities if it does not sell any assets. Rcom has breached some debt covenants, and hence has limited ability to raise further debt to improve liquidity. It has received waiver consents from most of its lenders for breach of covenants. Asset Sale to Support Ratings:
回覆刪除Rcom has a non-binding arrangement to sell Infratel's tower business to Tillman Global Holdings, LLC and TPG Asia, Inc. Should this transaction proceed and sale proceeds are used to pay down debt, Rcom's FFO-adjusted net leverage could improve to below 4.0x as the indicative enterprise value will more than offset the additional lease-adjusted debt. Apart from the sale of tower business, Rcom is also considering deleveraging via a sale of its non-core assets, including its under-sea cable subsidiary Global Cloud Xchange (GCX; B+/Stable), real estate and its pay-TV business. However, progress on these asset sales has been slow to date. Weak Market Position: Rcom's IDR is constrained by its weak market position as the fourth-largest telco in India with a revenue market share of around 8% and a subscriber base of mostly low-revenue customers. Rcom could face further challenges due to higher competition in the data market as Reliance Jio - part of Reliance Industries Ltd (RIL; BBB-/Stable) - enters the market in 2H16. However, Rcom's ownership of a pan-India spectrum in 800MHz/850MHz and its ability to offer faster 4G data services could help it fend off the competition, to some extent.
回覆刪除The top-three telcos - Bharti Airtel (BBB-/Stable), Vodafone India, a subsidiary of Vodafone Group Plc (BBB+/Stable), and Idea Cellular Ltd - have been gradually gaining market share and now account for about 70% of wireless revenue in India's telecoms market. Negative FCF on Larger Capex: We forecast FCF will be limited in FY17 as Rcom needs to invest around INR40bn (FY16: INR34bn - excluding a one-off spectrum payment of INR11bn) on capex to support its fast-growing data traffic and to improve the quality of voice services. However, its capex/revenue of around 17%-18% will still be below than top-three telcos' average of 19%-20% due to its infrastructure and spectrum-sharing arrangement with Reliance Jio. In January 2016, Rcom said that it would share and pool its 800MHz spectrum with Reliance Jio in 17 regions (known as "circles" in India). Rcom has future plans to share 800MHz spectrum in the remaining five circles. Spectrum sharing will give Rcom access to a wider band of spectrum and Jio's network to provide faster 4G data services and provide capex and operating costs savings. Rcom and Reliance Jio signed reciprocal infrastructure agreements during FY14-15 to share Rcom's 43,000 towers, 120,000km of inter-city fibre, and 70,000km intra-city fibre network for the next 17-20 years. Under the agreements, Rcom also has access to existing and future towers and fibre assets of Reliance Jio. SSTL Acquisition: We believe that Rcom's acquisition of Sistema Shyam Teleservices Ltd (SSTL), the Indian mobile subsidiary of Russia's Sistema JSFC (BB-/Stable), in an all-stock deal is credit neutral for Rcom, at least in the short term. Rcom will benefit from additional nine million subscribers and INR15bn revenue and also will be able to extend the life of its 800MHz spectrum in eight Indian circles. However, we believe that in FY17 incremental EBITDA from the acquisition will likely fall short of SSTL's annual spectrum cost of INR3.9bn - the cost of the spectrum SSTL acquired in the March 2013 auction will be paid annually over 10 years starting FY17. In the longer term we expect that growth in incremental EBITDA may make the transaction cash-flow positive. SSTL will pay off its existing debt before the acquisition. Competition to Intensify: We expect competition to intensify as Reliance Jio enters the market with cheaper tariff plans and faster data speeds, and armed with sufficient spectrum and access to funds. We expect the industry blended monthly average revenue per user (ARPU) to fall due to a decline in data tariffs, which will more than offset the rise in data usage. Rcom's FY17 blended ARPU, however, is likely to decline by 1%-2% compared with a 5%-6% decline in the industry's blended ARPU. This is because Rcom's ARPU of INR140 is already lower than the industry average of INR170.
回覆刪除Weak Liquidity: Rcom's liquidity is dependent on its ability to refinance its maturing debt because its cash generation and unrestricted cash of INR22bn are insufficient to pay its short-term debt of INR143bn. Banks have been willing to lend on a secured basis with licences and immovable assets as collateral. KEY ASSUMPTIONS Fitch's key assumptions within our rating case for the issuer include: - The sale of Infratel's tower business will happen in a timely manner and Rcom will use the sale proceeds to reduce its debt. - FY17 revenue to rise by 2%-3%, which will be below the industry average of 5% - due mainly to its loss of customers in five Indian circles. - EBITDA margin to narrow by 100bp in FY17 to 31.5% due to competition, especially in data services. (Please refer to "2016 Outlook: Indian Telecommunications Services", dated 20 November 2015 for details on Fitch's view on the industry) - Blended ARPU to fall by 1%-2% from INR140, which is below the industry average of INR170 - Industry revenue market share to decline to around 6%-7% from 7.5%-8% - SSTL acquisition will be completed and consolidated from FY17. SSTL will have a lower FY17 EBITDA margin of 15% compared with Rcom's 32%. - Effective interest rate of about 7.5%-8%. RATING SENSITIVITIES Negative: Developments that may, individually or collectively, lead to a negative rating action include: - Inability to demonstrate on a timely basis that funds will be available to improve liquidity and pay down debt such that FFO-adjusted net leverage falls below 4.5x on a sustained basis; Positive: Rcom's IDR has a limited upside as its business risk profile caps the IDR at 'BB-'.
回覆刪除Moody剛將Reliance由Ba3降級至B1。可能再會降級。故以100.5出清。另找替換。價微蝕，計埋息口也不錯！
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