It will be tough task for the lenders of Anil Ambani’s Reliance Communications, Reliance Telecom and Reliance Infratel to recover their loans of £4.5 billion from the beleaguered companies. The lenders admit that significant value of the company has been eroded. Banks have decided to short list a resolution professional from a field of 15 players after NCLAT allowed resumption of insolvency resolution action against R-Comm. In addition, other issues on loans related to the flamboyant businessman’s failed telecom ventures are expected to be taken up by banks, including some of the Chinese lenders, who have an exposure.
Anil Ambani’s businesses are under severe financial distress with lenders earlier referring Reliance Naval too for action under the Insolvency & Bankruptcy Code. In fact, a failed attempt by SBI to bail out R-Comm has delayed the action, which many lenders believe further impaired the asset, leaving little on the table for a potential buyer. The intense competition between Reliance-Jio, Airtel and Idea-Vodafone has already made the sector unviable for more players, given that revenues are falling with realisations dropping.
“Even if we find a buyer we will have to take a huge haircut,” said an executive with a public sector bank. The company has fibre network, towers and spectrum and its attempts to sell assets to realise value has yielded no results. The insolvency plea had been moved by supplier Ericsson for unpaid dues, which had been stayed by NCLAT. Subsequently, the Swedish equipment vendor moved the Supreme Court as Reliance Communications went back on its promise on payment. Anil Ambani had to be bailed out by his elder brother and Reliance Industries chairman Mukesh Ambani to make the payment.
But with the insolvency proceedings commencing, lenders sense an opportunity to realise some value from the remaining assets. Banks will have the first right over the value generated through the sale. The law provides a 180-day window for the resolution process to go through, which can be extended by another 90 days. In case the process fails to yield a desired resolution plan, the company will be forced to go into liquidation.