The Future of Reliance Communication: Debunking Misconceptions and Key Risks for Investors

Introduction

Many investors are currently making decisions based on incomplete information regarding Reliance Communication (Rcom), leading them to believe that the company will soon be acquired by Mukesh Ambani or that it will greatly benefit from 5G, leading to a rise in its share price. Such assumptions are misguided and based on outdated or superficial information. This article aims to clarify the current and future status of Rcom and debunk the myths surrounding its potential for investment.

Why Mukesh Ambani is Not Acquiring RCom

Mukesh Ambani initially showed interest in acquiring Rcom in early 2018. However, with the surfacing of the AGR (Accounting for Gross Revenue) issue, Mukesh Bhai stepped back from this acquisition plan. Since then, the Telecom Sector has faced significant challenges, leading Anil Ambani to declare Rcom for bankruptcy.

Anil Ambani's decision to force Rcom into bankruptcy was not instigated by banks, but rather a strategic move to protect his interests within the company. The rationale behind this decision highlights the deteriorating financial health of Rcom and the challenges it faces, particularly concerning the AGR dues. This move ultimately spelled doom for the equity shareholders of Rcom, who have no tangible returns to look forward to.

While Mukesh Ambani later expressed interest in the Infratel business of Rcom, this is purely because it benefits his Jio platform. Purchasing the Infratel business would not provide any direct benefits to the equity shareholders of Rcom. Moreover, the cancellation of Rcom's spectrum, which is among its largest assets and the sole hope for lenders in recovering their investments, further complicates the situation.

5G and Rcom

The benefits derived from 5G are contingent on the company's operational stability. Given that Rcom is currently dealing with liquidation and trying to find a resolution, the potential for 5G integration is minimal. In fact, these ongoing issues are leading to delisting of Rcom shares by exchanges, making them volatile and difficult to trade profitably.

Current Market Dynamics

It is crucial to note that spikes in trading volumes for companies under bankruptcy proceedings, such as Rcom, are driven solely by the resolution of the company's bankruptcy or the intention of new buyers. Any positive outcome from court proceedings regarding AGR dues would be a rare and crucial development. As of now, the future of Rcom remains uncertain and fraught with risks.

Conclusion

Investors should exercise caution when considering trades in Rcom shares. Given the company's current state and the lack of any concrete plans for its acquisition or integration into Mukesh Ambani's portfolio, it is advisable to avoid significant investment in Rcom. Instead, thorough research and a clear understanding of the underlying risks are essential before making any financial decisions.

Note: This article is based on the latest available information as of the writing date. Market conditions and legal proceedings may change, thereby impacting Rcom's situation.