Veritas downgrades RCom, puts target price at Rs 15

RCom says report is full of factual inaccuracies and that the "orchestrated release" of the report show that the agency has "ulterior motives"

Canada-based equity research firm Veritas has downgraded Reliance Communications, India's second-biggest mobile phone carrier by subscribers, to "sell" and has put a target price of Rs 15. The RCom stock is trading at around Rs 61-62 at noon on Tuesday.

Veritas has cited high debt, 'whimsical' accounting policies and poor corporate governance standards as some of the key reasons.

Veritas also said that it does not foresee any significant improvement in the tower market over the next 12-18 months, given the stampede by all players in the telecommunication tower market in India to monetise assets. Moreover, the firm estimates that at best the telecom major can monetise its Reliance Infratel tower asset at a diminished value of Rs 12,500 crore.

Veritas also said that the company’s accounting policies were whimsical and do not provide a clear picture of the underlying operating and business trends.

Veritas added that the risk management and governance practices of the company were sub-optimal.

Reacting to the Veritas report, Reliance Communications said the report was full of factual inaccuracies and the "orchestrated release" of the report showed that the agency has "ulterior motives". RCom also said that Veritas was destroying the confidence of the investor through publising false facts. The telecom player has also said that the report shows Veritas' complete lack of understanding of RCom's assets and businesses.