The company announced a loss of Rs 4,617 crore for FY17, compared to a loss of Rs 2,023 crore in FY16. This is a bad news for its promoter, Tata Sons, which will have to keep investing in the company’s equity so that it can meet its liabilities, bankers said. But, the company’s debt stood reduced almost five per cent from Rs 30,192 crore in FY16 to Rs 28,766 crore in FY17.
Because of the price war in telecom spurred by the entry of Reliance Jio, the Tata group company’s turnover declined to Rs 9,419 crore in FY17 from Rs 10,588 crore in FY16.
The Tata group company is not the only one which struggled during the year. Aditya Birla Group’s Idea Cellular also reported losses of Rs 400 crore, compared to a profit of Rs 2,728 crore in FY16. Sales and profits of the top two players, Bharti Airtel and Vodafone, also declined during the year (See chart).
Bankers said they were not worried about Tata Teleservices’ debt service coverage ratio of 0.18 as Tata Sons always stepped in with funds to pay bank loans. The Ebitda (earnings before interest, taxes, depreciation and amortisation) fell to Rs 1,341 crore in FY17 from Rs 1,700 crore in FY16.
Jio’s launch, in fact, has triggered a consolidation among the current telecom players. Vodafone India, the country's No.2 telecom company in terms of revenues, and Idea Cellular have announced a plan to merge their operations in India, thus becoming the country's No.1 player. Bharti Airtel, India’s No.1 player, has merged smaller player Telenor with itself. Reliance Communications is awaiting the Supreme Court’s approval to merge its wireless telephony business with Aircel, thus reducing its debt by half.
The rising losses of Tata Teleservices may be a dampener for a suitor to buy or merge the company.
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