RCom will have 270 days for its debt repayment plan
The court's decision means that RCom will have as long as 270 days to chalk out its debt repayment plan. | Bloomberg
Text Size:

The Mumbai bench of National Company Law Tribunal has placed Anil Ambani’s Reliance Communications Ltd. under insolvency proceedings. This will prevent Anil Ambani from selling RCom’s airwaves, towers, and fiber assets to his elder brother’s company.

The Mumbai bench of National Company Law Tribunal has placed Anil Ambani’s Reliance Communications Ltd. under insolvency proceedings. This will prevent Anil Ambani to sell RCom’s airwaves, towers, and fiber assets to his elder brother’s company.

An Indian tribunal ordered billionaire Anil Ambani’s Reliance Communications Ltd. be placed under insolvency proceedings, jeopardizing the phone company’s proposed $3.7 billion asset sale to Reliance Jio Infocomm Ltd.

The Mumbai bench of the National Company Law Tribunal on Tuesday accepted a petition from the Indian unit of network-equipment maker Ericsson AB, which is seeking to recover 11.6 billion rupees ($170 million) in unpaid dues. RCom, as the company is known, can appeal the verdict with a tribunal in New Delhi. The company and two of its subsidiaries will decide on the next course of action after studying the detailed order, RCom said in an exchange filing.

The court order sets back RCom’s planned sale of airwaves, towers and fiber assets to Reliance Jio, the phone company owned by Ambani’s older brother, India’s richest man. The decision on RCom, which is seeking to reduce its $7 billion in debts, comes after Aircel Ltd. filed for court protection from creditors in February as a bruising tariff war eroded earnings.

The decision means indebted RCom will be placed under a court-appointed resolution professional who will have as long as 270 days to work out a debt repayment plan or liquidate the firm. The latter scenario would result in what could be one of India’s biggest bankruptcies and conclude the downfall of what was once the country’s second-largest phone operator.

The company’s shares dropped 8.2 percent to close at 12.40 rupees Tuesday in Mumbai, the lowest since Dec. 18, 2017.

We are deeply grateful to our readers & viewers for their time, trust and subscriptions.

Quality journalism is expensive and needs readers to pay for it. Your support will define our work and ThePrint’s future.

SUBSCRIBE NOW

A two-member panel headed by Justice B.S.V. Prakash Kumar said Tuesday that an insolvency-resolution professional will be decided on in a day or two.

If the company is sold under the insolvency process, Jio might have to clear a legal hurdle to bid for RCom. Recently implemented bankruptcy rules bar takeovers of stressed assets by entities related to the defaulting promoters. The rule is aimed at blocking back-door entry by delinquent owners.

Jio has tower, fiber and airwaves sharing pacts with RCom and could suffer some loss of competitiveness if a rival were to secure the beleaguered operators’ assets.

The bailout deal with Reliance Jio, announced in late December, had triggered a record rally in RCom shares. The stock has crashed nearly 66 percent this year amid a bevy of lawsuits, including one by a unit of HSBC Holdings Plc.

The company’s woes have been building for years as it delivered declining profits for six out of seven years, before posting its first annual loss in the year that ended March 2017. Earnings for the year to March 2018 will be announced on May 19.

Like other carriers, RCom struggled as India’s phone market became overcrowded — there were a dozen operators in the country as of last year, versus three in China. Those pressures became particularly acute after Reliance Jio launched in September of 2016 with free services.

RCom is the second-largest listed company by assets in Anil Ambani’s business empire. Besides the phone carrier, Ambani controls Reliance Power Ltd., Reliance Capital Ltd., Reliance Naval & Engineering Ltd., Reliance Infrastructure Ltd., Reliance Home Finance Ltd. and Reliance Nippon Life Asset Management Ltd.

Though corporate failures have occurred in India before, the country never had formal bankruptcy rules until they were enacted into law in May of 2016. That empowered the central bank and local lenders to push companies into insolvency and accelerated their ability to recover bad loans. The law is now being tested through bitter court battles. -Bloomberg

Subscribe to our channels on YouTube & Telegram

News media is in a crisis & only you can fix it

You are reading this because you value good, intelligent and objective journalism. We thank you for your time and your trust.

You also know that the news media is facing an unprecedented crisis. It is likely that you are also hearing of the brutal layoffs and pay-cuts hitting the industry. There are many reasons why the media’s economics is broken. But a big one is that good people are not yet paying enough for good journalism.

We have a newsroom filled with talented young reporters. We also have the country’s most robust editing and fact-checking team, finest news photographers and video professionals. We are building India’s most ambitious and energetic news platform. And we aren’t even three yet.

At ThePrint, we invest in quality journalists. We pay them fairly and on time even in this difficult period. As you may have noticed, we do not flinch from spending whatever it takes to make sure our reporters reach where the story is. Our stellar coronavirus coverage is a good example. You can check some of it here.

This comes with a sizable cost. For us to continue bringing quality journalism, we need readers like you to pay for it. Because the advertising market is broken too.

If you think we deserve your support, do join us in this endeavour to strengthen fair, free, courageous, and questioning journalism, please click on the link below. Your support will define our journalism, and ThePrint’s future. It will take just a few seconds of your time.

Support Our Journalism

Share Your Views

LEAVE A REPLY

Please enter your comment!
Please enter your name here