2G scam: Unitech, RCom wipe out 97% shareholder wealth in 10 years

While Unitech has slipped 97% from Rs 257 on August 01 2007 to Rs 7 levels now, RCom slipped from Rs 530 levels back then to around Rs 17 levels now. By comparison, the Sensex has gained around 126%

Shares of Sanjay Chandra-controlled Unitech and Anil Ambani-owned Reliance Communications (RCom) along with Tata Teleservices (Maharashtra) – accused in the Rs 1.76-lakh crore 2G spectrum allocation scam – have not been able to regain lost glory since August 2007, when the government (Department of Telecom) initiated the process of allotment of 2G spectrum along with Unified Access Services (UAS) licences.

While Unitech has slipped 97% from Rs 257 on August 01 2007 to Rs 7 levels now, RCom has tanked from Rs 530 levels back then to around Rs 17 levels now. By comparison, the S&P BSE Sensex has gained nearly 126% during this period.

Post the CBI court verdict that acquitted all accused, including former telecom minister Andimuthu Raja, Dravida Munnetra Kazhagam (DMK) member Kanimozhi and corporate executives like Swan Telecom’s Shahid Balwa, Unitech’s Sanjay Chandra and the Essar group’s Ruias, as the prosecution failed to prove the case against them, stocks of these listed companies rallied as much as 20% in intra-day deals.

Investment call

So, should you buy these stocks now that the verdict has been in their favour? Will they be able to lost glory? Well, analysts don’t think so.

The verdict, they believe, will not change the fortunes of these stocks going ahead and investors should use any rally in these counters to exit. They, however, remain bullish on Sun TV, which they feel is on a better fundamental footing than the rest of the listed companies that were accused in the 2G scam case.

“Sun TV is in a different business than telecom. They have one of the highest earnings before interest, taxes, depreciation and amortisation (Ebitda) margins in the core segment the company operates in. even if the judgement would have adverse, it would not have impacted their business. RCom and Unitech, on the other hand, are in an industry that is going through a rough patch. There can be a temporary boost in their stocks, which should be used as an exit opportunity,” suggests A K Prabhakar, head of research at IDBI Capital.

Recently, the Supreme Court (SC) stayed the National Company Law Tribunal’s (NCLT’s) order allowing the government to take charge of Unitech's management. Promoters Sanjay and Ajay Chandra, currently in judicial custody, have been allowed to negotiate sale of the group’s unencumbered assets to raise Rs 750 crore by December-end.

Anil Ambani - controlled RCom, too, is facing insolvency proceedings filed by lenders such as China Development Bank and Ericsson India before NCLT.

“Of the lot, Sun TV still is a good bet. I will not advise investing into Unitech even after the 2G verdict. RCom, on the other hand, is facing asset sale. So in that sense, the downside can be limited from here. It is advisable to stay away from both these stocks for now,” advises Krish Subramanyam, co-head for equity advisory at Altamount Capital.

Company Name	20-Dec-2017	01-Aug-2007	Change (%)
Unitech Ltd.	7.08	257.18	-97.25
Reliance Communications Ltd.	17.27	530.60	-96.75
GTL Ltd.	14.35	231.40	-93.80
Mahanagar Telephone Nigam Ltd.	25.50	142.35	-82.09
GTL Infrastructure Ltd.	6.35	33.25	-80.90
Tata Teleservices (Maharashtra) Ltd.	7.00	27.20	-74.26
Idea Cellular Ltd.	98.05	123.95	-20.90
Aksh Optifibre Ltd.	32.20	39.20	-17.86
Bharti Airtel Ltd.	528.60	431.48	22.51
Himachal Futuristic Communications Ltd.	30.35	21.50	41.16
Tata Communications Ltd.	681.00	449.80	51.40
S&P Bse Sensex	33777.38	14935.77	126.15
Sun TV Network Ltd.	939.75	398.10	136.06
ITI Ltd.	144.45	41.00	252.32
Sterlite Technologies Ltd.	293.85	41.57	606.88
Vindhya Telelinks Ltd.	1321.20	136.10	870.76
*Change between Aug 01, 2007 and Dec 20, 2017
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