I came across this article about how RCOM is planning to reduce its debt
http://www.financialexpress.com/news/reliance-communications-plans-to-reduce-manpower-by-35005500/1267740
Question is - how did it end up with such a high pile of debt? Is it fine for a company to have such huge debt and still declare profits? Averaging a 1k crore per year PAT over last five years, it'd take it atleast 40 yrs to turn profitable in absolute numbers. What kind of accounting is this?
Payment of only interest will lend a person perpetually in debt. It's not a good idea for credit card (unsecured loan); can't be any better for corporate loan (secured loan). Not sure this should be "a normal practice" - declaring profitability with such huge debt. What kind of assets have a useful life of 40years? This business doesn't look viable even on paper. How did lenders agree for such a loan? Banks won't give even home loan for more than 20years period.
http://www.financialexpress.com/news/reliance-communications-plans-to-reduce-manpower-by-35005500/1267740
Question is - how did it end up with such a high pile of debt? Is it fine for a company to have such huge debt and still declare profits? Averaging a 1k crore per year PAT over last five years, it'd take it atleast 40 yrs to turn profitable in absolute numbers. What kind of accounting is this?
Payment of only interest will lend a person perpetually in debt. It's not a good idea for credit card (unsecured loan); can't be any better for corporate loan (secured loan). Not sure this should be "a normal practice" - declaring profitability with such huge debt. What kind of assets have a useful life of 40years? This business doesn't look viable even on paper. How did lenders agree for such a loan? Banks won't give even home loan for more than 20years period.
