Anil Ambani-led Reliance Communications (RCom) on Tuesday announced a new plan aimed at reducing the company’s huge debt burden by about Rs 25, 000 crores through the sale of some of its spectrum, tower and fiber network assets. Ambani also indicated that a strategic investor would be coming on board RCom but did not disclose any name. He told journalists that the new plan has the support of China Development Bank that had dragged RCom to the National Company Law Tribunal to recover dues running into USD 1.8 billion. The RCom stock rallied 35 percent on the BSE to Rs 22.01 percent after the announcement.
The company is reeling under a debt mountain of over Rs 44,000 crore. Ambani said the plan entails RCom exiting the structural debt restructuring (SDR) framework with no conversion of debt into equity and zero write-offs by banks. He expects the deal to be fully closed by March 2018. He said the deal involved an eight-stage asset monetization process under an oversight committee headed by former RBI deputy governor S S Mundra with members from Trai and the whole process will be completed in 40 days.
The proceeds from asset monetization will be used only to pay back banks, including China Development Bank with whom the company sealed an out-of-court settlement last evening in Beijing. On lenders not having to face a hair-cut, he said the new plan involves zero equity conversion for lenders and bondholders. The debt resolution also involves a part transfer of spectrum installments that have to be paid to the government, Ambani said. As many as 31 lenders led by SBI had met over the weekend.
RCom has struggled under a heavy debt load and has reported a string of losses during a price war unleashed by Mukesh Ambani-run Reliance Jio in the Indian telecom market. R-Com has been forced to shut down its 2G services as they had turned unviable with the elder Ambani’s company offering free voice calls and data at dirt-cheap rates. Ambani has also been focusing on reducing the debt of his other companies to concentrate on upcoming opportunities in the defense manufacturing business as well as in its engineering, procurement and construction businesses.
Reliance Infrastructure had last week signed an agreement to sell its Mumbai power business to Adani Transmission for a total consideration of Rs 18,800 crore. RInfra will utilize the entire proceeds of this transformative transaction to reduce its debt, becoming debt free and garnering up to Rs 3,000 crore as cash surplus. Once all these capex-heavy businesses are sold, the company wants to focus on the defense business under the aegis of the “Make in India” scheme being promoted by the Narendra Modi government.
The Reliance Group’s has formed a joint venture, Dassault Reliance Aerospace Pvt. Ltd, with French-aircraft maker Dassault Aviation that is in line to benefit from a Rs 24,500 crore seven-year offset clause in the deal India has signed with France for the supply of 36 Rafale fighter jets from Dassault.