Reliance Communications announces debt revival plan, ropes in new investor

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Shares of lenders got traction action after Chairman of Reliance Group Anil Ambani said Reliance Communications has exited the strategic debt recast and further stated that no debt of the company will be converted into equity.

Addressing the media on the restructuring plan, Mr Ambani said RCom's exit from the consumer mobile business was a outcome of fierce competition in the sector, which has been rocked by last year's arrival of Reliance Jio, controlled by Mr Ambani's elder brother Mukesh Ambani. "The entire monetisation process to repay the debt of lenders will be completed by January-March 2018 in a phased manner", Ambani told reporters here.

The resolution plan, however, involves exiting strategic debt restructuring (SDR) and monetising some of the company's assets, including transfer of spectrum liabilities by March 2018. Of this, Rs 25,000 crore is domestic debt and remaining Rs 20,000 crore is in the form of foreign loans and bonds.

The company has engaged with unsecured creditors and has received nine non-binding offers for stake sale in RCom, said Ambani while adding that Chinese banks have been part of RCom's debt resolution plan.

Ambani pegged the valuation of development potential of 125 acres at DAKC at Rs 25,000 crore and the new Reliance Communications to have a debt of less than Rs 6,000 crore. Upon completion, RCom will be relaunched as a much smaller company that will operate as a business-to-business firm, rather than a retail player.

The telecom company has been hit hard by competition in the industry post the entry of Reliance Jio, which triggered a consolidation in the sector.

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It may be noted that the company's asset monetisation was run with independent oversight panel chaired by the Reserve Bank of India's Deputy governor SS Mundra.

Ambani said the money raised from the sale will be used to pay back lenders, including China Development Bank, which requested the company be declared insolvent before India's National Company Law Tribunal in order to recover around $2 billion in debt.

Ambani also said RCom is working with all its lenders to sell its varied assets, including property, except the flagship Dhirubhai Ambani Knowledge City campus in Navi Mumbai.

RCom has close to Rs 45,000 crore debt on its books in October 2017, Ambani said. As per the SDR plan agreed in June, lenders were to convert at least Rs 7,000 crore in debt into equity. He also said that, according to an estimation done by Credit Suisse, the new RCOM will have an enterprise value of Rs 15,000 crore. "Binding bids will come up in one or two months for some parts of the business that require more financial due diligence, while some will be in nearly immediately", the person said.

Even the "mighty" house of Tatas had to "gift away" their telecom business (to Airtel), Ambani asserted, sounding bitter about the regulatory framework, saying the long time taken to clear RCom's merger with Systema Shyam Telecom represents the "unease of doing business".

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