Anil Ambani group stocks plunged on Monday after Reliance Communications (RCom) said Friday that it would file for bankruptcy as it’s been unable to sell assets to repay debt over the past year and a half. RCom fell as much as 48% intraday to a record low of ₹6, then recovered to close at ₹7.55, down 35% on the BSE.
Later on Monday, RCom approached the National Company Law Appellate Tribunal (NCLAT) to withdraw its appeal against a May 2018 National Company Law Tribunal (NCLT) order that had admitted bankruptcy proceedings. The tribunal ruled that RCom cannot sell movable or immovable assets without the permission of either the Supreme Court or the tribunal till further orders. The NCLAT will next hear the matter on February
12. Also on Monday, another tribunal ordered the telecom department to return bank guarantees worth ₹2,000 crore to the company.
RCom has fallen 86% in the past three years. On Monday, Anil Ambani group stocks collectively lost ₹6,300 crore in market capitalisation: Reliance Power sank 35% to ₹17.10, Reliance Naval and Engineering declined 14.7%, Reliance Infra slipped 14.9%, Reliance Home Finance fell 12.7% and Reliance Nippon dropped by 3.3%.
“Until further orders, the appellants, corporate debtor (company), respondent(s), guarantors or any third party will not sell, transfer or alienate any moveable or immoveable property of the corporate debtor (company) nor invoke any guarantee or mortgage or any other instrument without prior permission of this appellate tribunal or the Hon’ble Supreme Court,” NCLAT said in its order on Monday.
RCom, which has debt of about ₹42,000 crore, said Friday that moving the NCLT will help it sell assets in a timebound manner.
“The board decided that the company will seek fast-track resolution through NCLT, Mumbai,” it told exchanges. “The board believes this course of action will be in the best interests of all stakeholders, ensuring comprehensive debt resolution in a final, transparent and timebound manner within the prescribed 270 days.”
RCom’s appeal to withdraw the earlier NCLAT application was opposed by Swedish telecom gear maker Ericsson, which pointed out that the telco owed the operational creditor a settlement amount of ₹550 crore and that the matter is scheduled to be heard in the Supreme Court. The Swedish firm was given time till February 8 to file its reply. The tribunal has listed the case for “orders” on February 12, a day after the RCom-Ericsson battle comes up in the apex court for hearing. Ericsson has filed a contempt of court petition against RCom chairman Anil Ambani for not paying its ₹550 crore settlement amount.
“This is a belated move and the case should have gone to NCLT 18 months ago,” said investment adviser SP Tulsian. “Jio will continue to be interested in acquiring assets of RCom which they had agreed to earlier. All secured creditors will also benefit through NCLT as recovery will be faster and may be higher, as DAKC (Dhirubhai Ambani Knowledge City) monetisation may also happen through NCLT.”
For RCom’s value to be ascertained, the liquidation process will have to be started, said an executive whose bank has substantial exposure to the company.
“We will first have to chalk out a resolution plan to be okayed by a committee of creditors,” he said. “It is too early to assume that the company will be liquidated. Bids will have to be sought under a bankruptcy process. But one thing is certain, now that the company is on board lenders will have an upper hand in finding a resolution.”
TDSAT ORDER
The operator got a breather in another case. The Telecom Disputes Settlements and Appellate Tribunal (TDSAT) ordered the telecom department to return bank guarantees worth Rs 2,000 crore that were given as one-time spectrum charge (OTSC). The dues are towards payment of market-linked prices for excess spectrum held by a telco. RCom had provided the bank guarantees in 2016 after the Department of Telecommunications (DoT) demanded them in late 2015. RCom made the payment and simultaneously moved the tribunal against DoT, contesting the demand. The case moved through various other courts and was heard again by TDSAT on Monday.
Sources in the telecom department said it will challenge this decision in the Supreme Court.
The stock’s recovery prospects look bleak, said market participants.
“Traders may make a quick buck on the moves in the stock. But beyond that, there is huge risk to being long in such stocks,” said Kush Katakia, CEO, Beanstalk Advisory. RCom’s net loss widened in the quarter ended December to ₹238 crore on a consolidated basis against loss of ₹130 crore in the year earlier.
The stock’s performance will depend on the pace and form in which resolution takes place.
“Most people assumed that if it goes through NCLT then the company’s equity will have no value but it is not necessarily true,” said investment advisor Sandip Sabharwal. “Earlier, they were trying to avoid default and so resolution didn’t go through. I expect a fast resolution now. However, the residual value is tough to determine.”
Ericsson, which has been battling RCom over dues for more than a year, is preparing to seek stringent sanctions on the operator for failing twice to make the payments and moving the NCLT for debt resolution. One of its options is demanding that all personal assets of chairman Anil Ambani be frozen, according to people with knowledge of the matter.
RCom had moved NCLAT challenging NCLT’s order to begin insolvency proceedings against the telco and its two units last May. The telco staved this off by coming up with an asset-monetisation plan that included selling wireless assets to Reliance Jio Infocomm (Jio) and some real estate parcels to Canadian firm Brookfield.
Source: Economic Times