The last brokerage which was covering Reliance Capital, the commanding company of Anil Ambani group, has decided not to do so after Price Waterhouse resigned as one of the statutory auditors of Reliance Capital. Analysts now believe that it doesn’t make much sense to stay invested in Reliance Capital shares, given the rating downgrades, auditors’ resignations and the stressed balance sheet of the company.
Shares of Reliance Capital, which have plunged 80 percent in the past year, ended at Rs 84.40, down 3.5 percent on the BSE on Thursday. The market had been discounting its media and group exposure of about Rs 10,000-15,000 crore, with little chance of recovery. To add to this, stake sale of subsidiaries to meet debt obligations has aggravated concerns and eroded shareholder value.
A note by ICICI Securities said, “post the recent rating downgrade of subsidiaries to default, the resignation of the auditor comes as a major setback to the parent company.”
It added, “given the exits from businesses generating strong RoE, Reliance Capital, the holding company, will be left with a low earnings portfolio. This is seen as a setback for existing shareholders, and therefore, we dropped coverage on Reliance Capital.”