Anil Ambani-owned Reliance Communications (RCom) said on Tuesday it had exited the strategic debt restructuring (SDR) scheme of lenders by agreeing to sell its telecom towers, real estate and other assets, and getting a strategic investor in the “new RCom”, which would help reduce its debt by Rs 39,000 crore.
The company expected to conclude all the transactions by March next year and banks would not have to take any haircut, said Anil Ambani, chairman of RCom. “This is the largest debt reduction in India,” he added.
After restructuring, RCom will reduce its debt by 87 per cent to Rs 6,000 crore. As of March 2017, the company had a debt of Rs 44,700 crore.
Lenders said the account would become non-performing this quarter and they would have to make provisioning in excess of Rs 6,000 crore. However, they said the pain would be temporary as the company had a credible resolution plan. Top lenders to RCom include State Bank of India, IDBI Bank, and Bank of Baroda.
According to the plan approved by Indian lenders, RCom will raise Rs 25,000 crore by selling 122.4 MHz of 4G spectrum and over 43,000 towers. It will also sell 178,000 route km (rkm) of optical fibre cable spread across the country and 248 media convergence nodes, covering 5 million sq ft, used for hosting telecom infrastructure.
The company will also sell prime real estate located in New Delhi, Chennai, Kolkata, and other cities.
Additionally, the commercial development of the Dhirubhai Ambani Knowledge City campus in Navi Mumbai will lead to a reduction of RCom’s debt by Rs 10,000 crore, with the special purpose vehicle holding the real estate assuming non-recourse long-term debt financing of the said amount, Ambani said. The company also plans to sell a minority stake worth about Rs 4,000 crore.
China Development Bank, which moved the National Company Law Tribunal (NCLT) to recover its $1.5 billion (Rs 9,600 crore) in debt, would withdraw the recovery suits, said Ambani, who returned from Beijing early Tuesday morning.
Ambani said the company had fallen on hard times mainly due to a crisis in the telecom sector, which saw many top companies losing money. “This is a crisis of India’s wireless telephone sector. It’s a guzzler of cash, and one has to have unlimited supply of cash to keep the business running. If a mighty group like the Tatas has to sell its wireless business for free, then you can imagine the condition of the rest of the players,” he said.
The company, he said, had received many offers from potential buyers and an independent committee led by former Reserve Bank of India deputy governor SS Mundra was overseeing the sale process. Ambani said RCom’s bondholders would be put on a par with all other lenders, and that they didn’t have to take any haircut. The company would resolve all issues with unsecured creditors as well.
Ambani said that after the debt restructuring, the company would look at selling a minority stake in the company to a strategic partner. “We will focus on business-to-business opportunity and we will sell a minority stake to global strategic partners,” he said. Post-restructuring, RCom’s 50 per cent revenue and 58 per cent of the EBITDA (earnings before interest, tax, depreciation and amortisation) would come from overseas, he said.
Ambani, who was visibly happy as compared to the June 2 news conference, when he first announced that the company had entered the SDR scheme, said he was not aware of the Insolvency and Bankruptcy Code, the NCLT or even the SDR process till the company actually faced it. “I had no clue what an IBC, NCLT or SDR process was. Now that I have reasonable experience, we would work towards a goal that we will never, ever, ever face an IBC, NCLT or a SDR process,” he said. The news conference was attended by Ambani’s wife, Tina Ambani, and sons Jai Anmol and Jai Anshul.
Reacting to the development, RCom shares shot up to close 31 per cent up at Rs 21.33 a share. The stock has lost 37 per cent of its value in calendar 2017. In comparison, the BSE Sensex has gained 28 per cent since January this year.
Ambani said with the company reducing its debt, Indian lenders’ telecom exposure will reduce by Rs 21,000 crore. “Immaterial of legal documents, the one mode of financing which is important is moral financing. I want to make sure that no one loses money and I firmly believe in protecting my name and the name of my father,” he said.