Indian tycoon Anil Ambani plans $3.2b asset sales to reduce debt pile

Photographer: Qilai Shen/Bloomberg

Indian tycoon Anil Ambani plans to raise about 217 billion rupees ($3.2 billion) by selling assets from roads to radio stations in a bid to cut debt.

The breakdown is like this, according to the group spokesman:

  • Reliance Infrastructure Ltd. is seeking 90 billion rupees from the sale of nine road projects
  • Reliance Capital Ltd. aims to raise 12 billion rupees by selling its radio unit, and 115 billion rupees from monetizing its holdings in the financial business

Ambani is waging a war on debt. He said on June 11 that his Reliance Group repaid 350 billion rupees in the past 14 months through asset disposals. But a large pile remains. The four biggest group companies still have about 939 billion rupees of debt. And that excludes Reliance Communications Ltd., Ambani’s former flagship firm, that recently slipped into insolvency.

Further asset sales would help Ambani bolster the financial health of his group’s companies after a string of setbacks that included an auditor resigning at one of the firms and plunging stock prices at others. Rating cuts have also flagged credit market concerns.

Quick Closure

Quick closure of the planned asset sales is key. CARE Ratings had pointed to delays in divestments at Reliance Capital in an April statement while cutting the financier’s rating.

Reliance Communications’ 2017 deal to sell its telecom assets to Reliance Jio Infocomm Ltd., owned by Anil’s elder brother Mukesh Ambani, was scrapped earlier this year.

“The lack of timely realizations in the asset sales is sounding alarms for most of the Anil Ambani-led companies,” said Mathew Antony, managing partner at Aditya Consulting that advises bankrupt firms on fund raising.

Reliance Infrastructure is in advanced talks to sell its nine road projects, its spokesman said. The Mumbai Metro rail operator aims to be debt-free by March 2020. It pared its consolidated debt by 45% over a year to 177.7 billion rupees as of end-March, the spokesman said.

On The Block

Company Asset Monetization target (in billion rupees)
Reliance Infrastructure Nine road projects 90
Reliance Infrastructure Long-term lease on Reliance Center office in Santacruz East, Mumbai Undisclosed
Reliance Capital 100% stake in Reliance General Insurance Co. 50
Reliance Capital Reliance Nippon Life Asset Management 45
Reliance Capital Prime Focus 10
Reliance Capital Private equity/Real Estate 10
Reliance Capital Radio business (already announced the sale to a unit of Jagran Prakashan) 12

Source: Reliance Group

Shares of Reliance Capital and Reliance Infrastructure climbed for the first time since July 2. Both Reliance Capital and Reliance Power Ltd. advanced about 5% in Mumbai. Reliance Infrastructure, which announced a debt resolution pact with lenders Thursday, closed nearly 11% higher.

Proceeds from asset sales would help trim debt across companies and could aid in resurrecting credit ratings.

Brickwork Ratings, the latest to downgrade Reliance Capital, cut its score one notch last month. PriceWaterhouseCoopers, one of its statutory auditors, resigned in June saying that it didn’t receive satisfactory response to certain observations and transactions — a claim the company has refuted.

Reliance Capital had “duly responded to the various queries and letters” of PWC and convened a meeting of its audit committee on June 12 to further respond to PWC’s May 14 letter, the company said. PWC’s observations were “completely baseless and unjustified” and the auditor “acted prematurely” without statutory discussions with the company’s audit committee, it said.

Bloomberg News is currently defending litigation brought by Anil Ambani and Reliance Communications in connection with previous Bloomberg reporting.

Reliance Power Ltd. was cut six steps in June by ICRA, which cited deteriorating finances and liquidity. Reliance Infrastructure, whose rating was dropped to D at Care Ratings last month, reported a consolidated net loss of 33.01 billion rupees for the quarter ended March.

“Reliance Group is committed to meeting all future debt obligations,” Ambani said in a rare conference call last month, and becoming “capital light, with bare minimal debt.”