In India, in a twist of tale between the two rival billionaire brothers, Anil Ambani’s wireless carrier file for bankruptcy which might have one clear winner and that is his elder brothers mobile phone company.
On Friday the procedure started in Mumbai, once permitted by the court will leave Ambani’s Reliance Communication Ltd [RCom] to repay the debt or settle it within 270 days. RCom willingly took the calculated steps of the sale of a tower, fiber assets and spectrum to the elder brother Mukesh Ambani’s Company Reliance Jio Infocomm Ltd, which was later delayed. The deal of around $2.4 billion (173 billion) caused doubts and trials by creditors who were seeking for payments before the sale. At the movement, Mukesh Ambani the elder sibling will have an advantage over the bidding operation of the assets especially of a company whose destruction he helped by invading into the mobile phone market during 2016 by giving free services. Due to the relaxation rules by the top court in January which restrained the family members from auctioning on the parts of the company that is going through bankruptcy, Mukesh Ambani can now only fight for RCom’s wireless carrier assets.
If RCom goes into liquidation, then the value of the RCom’s will be ruined, and due to this weapon hanging around, the buyers might negotiate even harder during the insolvency process with the creditors and may end up in bringing down the value, Apurva Jayant who is a partner at law firm L&L partners stated.
The equity shareholders of Rcom’s are deprived of already. The RCom’s shares have flooded already on Monday to a record by losing more than a third of the price, before closing valued at 7.6 rupees which is the lowest listing ever since 2006. In 2018 the stock had declined to 60 percent because India’s former number 2 wireless carrier had fought with the creditors in the court and had suggested the sale of one asset after another that fell through.
Additional listed parts of Anil Ambani’s empire were hammering as well on Monday. Reliance Capital Ltd noticed a drop of 20 percent which is the lowest price ever since June 2005. Reliance Power Ltd also dropped by 35 percent to its record low, and Reliance Naval and Engineering Ltd also declined by 15 percent which is the lowest ever noticed.
The downfall further alarms additional critical movement within the battling fortunes between two siblings of India’s richest family. The elder brother is more comfortable who at present, is the richest person of Asia much obliged for the profit in the value in parts of his flagship’s shares, who is delighted by the success of the wireless carrier which he established only 2 years before.
Reliance Jio did not respond the email seeking for comment.
After obtaining the business from their father, in 2005 the rival brothers partitioned the group into separate parts in a peaceful manner through the means of their mother, Kokilaben Ambani. Mukesh was given the control to take over the oil refining, and petrochemical company whereas Anil received a new business to take control over like financial services and the crown jewel, power generation, telecom business which was greatly expanded by his elder brother.
Due to a non-compete clause between the two brothers, Mukesh was kept out of the telecoms till 2010 when the agreement was scrapped. This led Mukesh to start a new telecom company which gave rise to Reliance Jio, which developed a faster 4G wireless network.
Meanwhile, RCom slipped, and Jio roared higher, attracting customers with free services and inexpensive phones. The price war not only took over the RCom but also terminated various rival wireless phones carries further allowing them to merge or to go through bankruptcy.
While the RComm encountered difficulty, it gave up completely from the wireless carrier business and further focused for growth in undersea cable services and in data centers although the debts continued to grow higher.
Anil Ambani in December 2017 mentioned that there would be no write-offs or equity conversions for the creditors or the bondholders because the company was approaching the sales of assets which will help the company to gain money to pay the debt. During the previous year, he had sought patience from the lenders and investors by specifying that the RCom’s debt reduction strategy will be the largest in the history of India and this will further help to build a long-term value with shareholders.
But none of these came into existence.
Lenders were confident of 60 percent of the write-off on loan to RCom, as per the one of the member of the banker’s family along with the negotiation who insisted not to name and to reveal the personal information about him. The independent filling of RCom with only one buyer in the race might have increased to at least 80 percent, one of the bankers informed.
The RCom assets have either no or very few buyers other than one, which clearly states that the creditors are in much deeper haircuts, the managing partner Rajesh Narain Gupta at law firm SNG Partner’s, mentioned it on Monday. The outcome might be very costly in some situations for the creditors.