Rolta Extends Slump to 17% in Two Days

Shares of Rolta India fell over 5.5 per cent to Rs 145 in early trade, extending its slump to over 17 per cent in two days. Its shares fell over 12 per cent on Thursday after US-based Glaucus Research issued a "strong sell" on Rolta's bonds, saying the company does not produce free cash flow and cannot repay offshore bondholders without refinancing.

"In our opinion, bondholders and rating agencies have fallen for the myth of Rolta," Glaucus said in its report, advising investors to sell the company's bonds due 2018 and 2019.

The Glaucus report alleges Rolta - a Mumbai-based information technology firm with operations in India and North America - fabricated its reported capital expenditures.

Rolta Chief Financial Officer Hiranya Ashar rejected the Glaucus report as "inaccurate and completely baseless."

Rolta India got a boost after Deutsche Bank raised its investment recommendation on the software firm's bonds to "buy" from "hold". Deutsche said it agreed with the company's response that Glaucus had made factual errors in its report and the report had very little new information.

"Issues such as persistent negative FCF (free cash flows) have been well known for a while, as the company was in the middle of a heavy capex cycle, which is now over, and in fact, it finally turned slightly free cash flow positive in the last quarter," Deutsche Bank said. (With Reuters Inputs)