Reliance Communications Slumps Most in 17 Months

Reliance Communications Ltd. (RCOM), India’s third-largest mobile-phone company by subscribers, dropped the most in 17 months in Mumbai trading after profit missed analysts’ estimates on higher finance costs.

The shares slumped 9.1 percent, the most since August 2011, to 80 rupees. Third-quarter net income fell 44 percent to 1.05 billion rupees ($19.5 million), Reliance Communications said yesterday. That missed the 1.62 billion-rupee median of 16 analysts’ estimates compiled by Bloomberg.

Billionaire Anil Ambani’s flagship company posted its second consecutive quarterly decline in profit after finance costs surged 59 percent. The drop in profit margins quarter-on- quarter is disappointing, according to Urmil Shah, an analyst at Kim Eng Securities India Pvt. in Mumbai.

“We remain negative on Reliance Communications due to lack of earnings growth, high net debt and low internal cash flow,” Shah, who maintained his sell recommendation on the stock, wrote in a note to clients today. “We don’t expect substantial improvement in 4Q and in FY14.”

The company’s margin, which represents earnings before interest, tax, depreciation and amortization as a proportion of sales, declined to 31.02 percent in the three months ended Dec. 31 from 31.66 percent in the previous quarter, according to data compiled by Bloomberg.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net;

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

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