Another setback for Anil Ambani, NCLT stays sale of Reliance Infratel assets

Industry:    2018-03-08

The National Company Law Tribunal stayed till March 13 the sale of assets of Reliance Infratel, the tower unit of Reliance Communications, the second setback this week for the Anil Ambani-owned telco that is rushing to pare debt by half by March end.

The injunction by BSV Prakash Kumar and Ravikumar Duraisamy of the Mumbai bench of the NCLT on Wednesday came after HSBC Daisy Investments (Mauritius), a minority shareholder in the tower company, argued that its consent was not sought for the asset sale and, if allowed, would be an “oppression of a minority shareholder under section 397 and 398” as Reliance Infratel would become defunct.

The tribunal has reserved the order for March 12.

According to legal sources, the RCom subsidiary may appeal against the stay order in the National Company Law Appellate Tribunal. The telco did not respond to ET’s queries.

“Consent was not asked. My company (Reliance Infratel) was profitable. Why are all assets of my company sold and only selective assets of RCom sold? Why should I go defunct? You cannot benefit yourself while I am wiped out,” argued senior counsel Iqbal Chagla, representing HSBC Daisy Investments, which owns about 5% in Reliance Infratel.

This is the second hurdle for RCom in its attempt to cut Rs 45,000 crore of debt. An arbitration tribunal in a legal battle with Swedish equipment provider Ericsson stalled RCom’s asset sale plan on Monday. RCom is on the verge of selling most of its wireless assets to Mukesh Ambani-owned Reliance Jio Infocomm for about Rs 25,000 crore, although both companies haven’t officially commented on the deal figure.

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Alpana Ghone, senior counsel representing Reliance Infratel, said the planned transaction includes Rs 8,000 crore for its tower and fibre assets, of which Rs 5,000 crore would be for the towers and land alone. Alternative asset manager Brookfield was set to pay Rs 11,000 crore for the towers before the deal was called off following the scrapping of RCom’s merger with Aircel.

The HSBC counsel demanded more details, which Anil Ambani’s counsel refused to divulge.

The court proceedings revealed that Bharti AirtelBSE 0.99 % was the second-highest bidder for the tower assets with an offer that was 25% lower than Jio’s.

Chagla argued that it was unfair that a tower company that made a profit of Rs 1,800 crore in the year ended March 2017 should be made to give up its assets while only select portions of parent RCom and Reliance Telecom were being sold as part of the overall asset monetisation programme.

He pointed out to the bench that RCom, after the monetisation, would be left with a viable, profitable, capital-light company looking into B2B areas, data enterprise, undersea cable and submarine business.

“From insolvency, you (RCom) will now have a viable company. RCom stands to benefit and I am the only loser,” said the senior counsel. HSBC had invested about Rs 1,100 crore in July 2007 and has about 5% share, while the rest is owned by other firms under Anil Ambani.

Reliance Infratel’s counsel countered that these were delaying tactics that would further erode the value of the telco’s assets and highlighted that the debt burden was the result of turbulence in the industry.

“We are helpless since the entire telecom sector is in a bad shape. Today it is a case of survival.

Blocking transactions will not help and it will reduce the value of the company,” said Ghone.

RCom plans to use the funds raised to repay RCom’s 35 lenders by the end of March, failing which the lenders could take the company to the NCLT under the Insolvency & Bankruptcy Code.

“If the sale does not happen, the joint lenders’ forum comprising of all lenders will be forced to sell the assets as distressed value. It will be sold as scrap,” said Ghone.

The joint lenders forum led by State Bank of India, which decided not to convert RCom’s debt to equity pending the asset sale to Jio, also argued that if the sale was not allowed, it would affect the banks and the public.

Birendra Saraf, appearing for the forum, argued that the bidding process for RCom’s assets, including the tower business, was done in a transparent way.

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