Not practical to buy RComm until telecom biz improves: IIFL

Reliance Communications could benefit in the medium-term from the demerger of its real estate business, says Bhavesh Gandhi, India Infoline. Telecom giant Reliance Communications will demerge its real estate business into a separate listed company called Reliance Properties in an effort to unlock value of its headquarters in Mumbai.

However, investors should focus on RComm's core telecom business and unless that improves it is not advisable to buy at current levels, he adds.

On the news that RIL has agreed to use RCom's fibre optic network for a one-time payment of Rs 1,200 crore, Gandhi feels that this money would flow in FY14 and the incremental gains from that deal may not be enough to justify the current valuations. Also read: Reliance Communications to demerge real estate business Below is the verbatim trranscript of his interview on CNBC-TV18

Q: How should Reliance Communications' investors read this demerger of the property business? Does it make any material difference to them?

A: Incrementally, medium-term it could may be help monetise the assets that the company has been talking about but we would focus more on the core telecom business. Unless we see the improvements there, it would be difficult to buy at current levels.

Q: What is your own sense of how close they are to fructifying any deal in terms of monetising their telecom assets because this talk has been on for a year and half in the market, on Reliance Communication monetising either their tower facilities or something else?

A: The deal of Fibre Optic sharing with Reliance Jio that Rs 1200 crore money should come in FY14, the current fiscal, so that should help. The 45,000 tower sharing deal would be more of a longer-term nature. Therefore, the incremental gains from that deal may not be enough to justify the current valuations.

Q: Have you guys worked out what could be a per share value for Reliance Properties- the share of which will come to Reliance Communication shareholders now?

A: It is difficult to quantity at current value, what value could accrue from the monetisation of Reliance Properties at this juncture.