Bankruptcy process: Debt-laden Aircel likely to go in for management bid

Aircel, which moved the National Company Law Tribunal (NCLT) last week, is exploring many options to run the business as an ongoing concern till the resolution process takes off.
 
It is learnt that a bid by the management, backed by financial investors, is an alternative that the telco is looking at. It is also weighing the possibility of an interim financing deal approved by a proposed resolution professional to take care of the operational expenses till the bids come. Another choice before the company is to convince key promoter Anand Krishnamurty of Maxis to pay the interest overdue of Rs 3 billion so that it becomes eligible to bid. Maxis has already invested more than $7 billion Rs 465 billion at the current forex value) in the India venture.

 
Sources said the top management was expected to go to Malaysia in a few days to discuss the plan of action. Further investment in the company was unlikely, they added.   
 

Senior executives pointed out that on January 25, the consortium of banks had cleared a restructuring plan under which the promoters would bring in fresh equity capital of $400 million Rs 26 billion), while the banks would convert a portion of their loans into equity so that they had a 45 per cent stake in Aircel. The rest of the debt would be restructured. However, weeks later, new rules announced by Reserve Bank of India abolishing such debt restructuring schemes forced Aircel to take a new path.

 
Aircel executives said the company could offer value to big boys like Airtel or Jio as a low-end mobile services brand. These customers (of Aircel) would take two to three years to move to 4G, they said.  The telco has substantial presence in Tamil Nadu, followed by the North East, Assam and Kolkata among others. Its plan is to operate only in seven circles and run 2G and 3G services. Currently, it is operational in 16 circles after it closed six some months ago. 
 
The company would be a test case in NCLT as unlike manufacturing plants, in service companies customers move away quickly and most of the assets except spectrum is outsourced, executives said. It is therefore trying to impress upon NCLT the need to hasten the process of resolution. “If we have to wait for 270 days, there will be no choice but to liquidate as customers would have left us and we of course won’t have the money to pay for rental of towers or electricity and employees,'' said a source.

 
The only value that the company will have is in the sale of its spectrum. The telco has over 84 million customers but has been losing market share due to the onslaught of Reliance Jio.   
 
The company has a total debt of Rs 150 billion, of which 70 per cent is with Indian banks. It also has to pay its vendors, many of whom have also filed recovery suits in courts.