Is RCOM Stock Worth Holding in 2023? Debunking Myths and Reality

Introduction

Many investors are currently under the impression that Rcom will soon be acquired by Mukesh Ambanirsquo;s company. They believe the company stands to benefit significantly from the 5G revolution, along with the attractive share price, making it an ideal investment opportunity. However, several key factors need to be addressed for a comprehensive understanding of Rcomrsquo;s prospects.

Mukesh Ambani and Rcom

Mukesh Ambani had expressed interest in acquiring Rcom in the early months of 2018. However, the AGR (Adjustable Royalty) matter led to Mukesh Ambani stepping back from the acquisition. Consequently, Anil Ambani decided to send Rcom into bankruptcy, marking a significant turning point in the companyrsquo;s fate.

Banks opted not to drag Rcom into bankruptcy court; rather, Anil Ambani himself initiated the process, demonstrating his intention to offload the failing company. Why did he do this? The primary reason was Mukesh Ambanirsquo;s refusal to buy Rcom due to the AGR matter. Following this, Rcom became a chaotic entity, leaving nothing of value for equity shareholders.

Bankruptcy Proceedings and Mukesh Ambani's Intentions

Even before the bankruptcy proceedings began, Mukesh Ambani was interested in purchasing Rcom for its potential benefits to Jio. However, after the AGR matter came to light, Mukesh Ambani dropped this plan. The risks associated with AGR dues were too high for him to bear.

Currently, Mukesh Ambani is showing interest in buying the Infratel business, a subsidiary of Rcom. This is beneficial for Jio, as Infratel provides the necessary telecom towers. However, this acquisition will not benefit Rcomrsquo;s equity shareholders. It depends on the intentions of the buyer and whether they are willing to address the companyrsquo;s existing debts.

The Deceptive Nature of 5G and Rcom's Challenges

While the 5G revolution is expected to benefit telecom companies, Rcom faces significant challenges. In fact, the company is still battling liquidation and searching for a resolution plan. This process will ultimately lead to the delisting of Rcom shares from the exchanges. No one holds any hope that Rcom will recover under its current state.

The cancellation of Rcomrsquo;s spectrum, which is among its biggest assets and crucial for lendersrsquo; recovery efforts, is well on the horizon. Lenders themselves are finding it difficult to recover their investments from Rcom. How, then, can equity shareholders hope to obtain any returns?

Recent Trading Trends

Recent weeks have seen an increase in trading volumes of Rcom shares, with large quantities of shares changing hands daily. It is important to note that for companies under bankruptcy proceedings, the ultimate drivers of share prices are the resolution of the company and the intentions of new buyers, who may or may not choose to compensate existing shareholders.

Conclusion

Investors should carefully consider these factors before making any trades in Rcom shares. The current environment is highly uncertain, and there is little hope for Rcom in the short term. It might be better to avoid large-scale investments in Rcom shares for the time being, unless there is a significant positive development in the legal proceedings related to AGR dues.

For a detailed analysis, investors can refer to the historical and ongoing legal battles, as well as the financial health of the company. Understanding these aspects will help in making informed decisions about whether to hold or divest from Rcom shares.