RCom hits 52-week low despite positive news on FCCB taxation issue

On Monday, the Supreme Court dismissed the special leave petition filed by the Income Tax department against Reliance Communications (RCom) on taxing of the proceeds of Foreign Currency Convertible Bonds (FCCBs), treating it as ‘unexplained cash credit’.

The Supreme Court order has relieved RCom from contingent tax liability of about Rs 4,800 crore. Earlier, the Income-Tax Appellate Tribunal and the Bombay High Court had also upheld RCom’s appeal against the order of the Income Tax department.

During FY07, RCom had issued FCCBs, as per the extant guidelines of the Reserve Bank of India and applicable laws, aggregating USD 1.5 billion (Rs 6,485 crore). The Income Tax department took the view to assess the FCCB proceeds as ‘unexplained cash credits’ and had raised tax demands thereon.

On the financial front, RCom’s revenue decreased 4.33 per cent to Rs 5,100 crore in Q2FY17 as compared to the same period in previous fiscal. The company’s net profit considerably dropped to Rs 39 crore in Q2FY17 as against Rs 195 crore in Q2FY16.

The share price of RCom declined 5.18 per cent on the bourses in early trades and is trading at Rs 35.2 on intraday basis. Despite positive development on the FCCB issue, the stock hit 52-week low on intraday basis.