India: RCom readies for fire sale of its assets to pare debt after Aircel merger fails

Photo: Hemant Mishra/Mint

Reliance Communications Ltd (RCom), which on Sunday called off a planned merger of its wireless unit with Aircel Ltd, is preparing to monetize assets ranging from spectrum to real estate as it strives to repay debt owed to banks, a top company executive said.

Under a revised plan, the company will be able to pare debt by as much as Rs25,000 crore, or more than half, much before December 2018, executive director Punit Garg said in an interview on Monday.

The company plans to adopt a 4G-focused policy, which would enable it to monetize its 2G and 3G spectrum, he said. It has also put on sale real estate assets in Hyderabad, Chennai and Navi Mumbai, apart from its corporate office in Delhi and the Dhirubhai Ambani Knowledge City in Navi Mumbai.

The moves, if successful, will pare debt significantly and bring relief to the company, which has been negotiating loan repayment terms with creditors. RCom is weighed down by Rs45,000 crore of debt.

Sale of the real estate assets, for which the firm has received interest from some Indian as well as global firms, will fetch the company Rs11,000 crore in total, Garg claimed. A telecom tower deal with Brookfield Asset Management Inc. will fetch RCom about Rs11,000 crore. This, however, is subject to a new valuation of the tower assets, given that Aircel’s tenancies will not be included in the deal anymore, Garg said.

Based on the 2016 spectrum auction, the value of the firm’s overall spectrum portfolio is Rs19,000 crore.

“If we stick to our one-year plan and three-year (business) plan, we should consider ourselves to be lucky. We should review our plans every quarter. It has got to be a rolling window every quarter—based on the strategy and competitive dynamics at the marketplace,” Garg said.

On Sunday, RCom and Aircel called off their proposed merger citing regulatory delays and opposition from some creditors, a development that had been expected to impede RCom’s efforts to pare its huge debt.

The merger and a separate deal to sell RCom’s telecom tower assets were the cornerstone of the Anil Ambani firm’s plan to pay down debt. Earnings of RCom and other telecom companies have been under pressure because of price competition posed by Reliance Jio Infocomm Ltd, controlled by his elder brother Mukesh Ambani, which launched its services in September 2016.

RCom’s lenders invoked strategic debt restructuring (SDR) for the telecom company in June. SDR allows creditors to convert a firm’s debt into equity and take over the management of defaulting companies.

The banks allowed the company to postpone debt-servicing payments till December 2017 after it presented a restructuring plan involving the sale of its assets. RCom said the “standstill period will continue till December 2018”.

“As per the RBI (Reserve Bank of India) directive, on SDR, you get a standstill on interest and principal repayment for 18 months. SDR was invoked on 2 June. Hence, our SDR continues until December 2018. So, there may be an imprint of a milestone of 210 days but that has nothing to do with the standstill that is provided by the regulator in its SDR regulation,” Garg said.

“In our old plan (for debt repayment), we were dependent on Supreme Court, DoT (Department of Telecommunications), or NCLT (National Company Law Tribunal). In the new plans that we have announced, there are no such dependencies,” he said.

This article was first published on