The Reliance Communications (RCom) scrip touched an intra-day 52-week low at Rs 60 on Tuesday.
This was on the back of a report from Veritas, a Canadian research firm, which raised doubts on RCom’s accounting and governance practices. They also ascribed a ‘sell’ status to the stock.
The stock closed at Rs 63.55, down 2.46 per cent from its previous close, on the BSE.
In its report titled ‘House of cards’, Veritas said that RCom was entering a phase of maximum uncertainty. The research firm said that the Reliance Infratel tower asset sale would be “realised at a diminished value of Rs 12,500 crore.” There have been rumours in the market place that the asset would fetch upwards of Rs 22,500 crore.
The research firm said that they were “sceptical of a meaningful reduction in financial leverage from the IPO of Flag Telecommunication, given that equity in its holding company has been pledged to secure debt of $500 million.”
Veritas further said that RCom’s accounting policies were “whimsical.” They did not provide a clear picture of the company’s operating and business trends. Veritas also found RCom’s risk management and governance practices to be “sub-optimal.”
Reacting to the report, RCom issued a statement saying that Veritas’ report was lacking in credibility and that it was “mala fide in intent and approach.”
RCom said Veritas’ report was full of “baseless allegations” and “factual inaccuracies.”
The company clarified that it was fully compliant with all the applicable accounting standards and risk management strategies.