SC asks RCom for Rs 14-bn guarantee, clears path for spectrum sale to Jio

The corporate guarantee will be issued by Reliance Realty Ltd, a wholly-owned subsidiary of RCom; after this, govt will issue NOC within a week

The Supreme Court on Friday asked the government to issue Reliance Communications (RCom) a no-objection certificate (NoC) for spectrum sale to Reliance Jio Infocomm by December 9 if it furnishes a corporate guarantee of Rs 14 billion within two days.

The said corporate guarantee will be issued by Reliance Realty Ltd, a wholly-owned subsidiary of RCom, its lawyer Kapil Sibal told the court.

The SC order, by a two-judge bench of Justice Rohinton Fali Nariman and Justice Navin Sinha, comes in the wake of Department of Telecommunications (DoT) challenging the Telecom Disputes and Settlement Appellate Tribunal's (TDSAT’s) October 1 permission to debt-ridden RCom to sell its spectrum to RJio.

In its petition before the top court, the DoT had remained firm on its stand that it would require a bank guarantee of nearly Rs 29 billion from RCom or RJio before it could allow spectrum sale.

RCom, on the other hand, had repeatedly expressed its inability to furnish a bank guarantee as the company was undergoing insolvency proceedings.

On Monday, the company had told the apex court that its asset sale to RJio could be jeopardised if the necessary approvals were not in place by mid-December, which would further put at risk its debt repayment plans. “If the deal falls, the government will get nothing, banks will get nothing.” Sibal said in court. “Everyone stands to lose.” As part of debt reductions efforts, Anil Ambani-led RCom had, in December 2017, signed a Rs 250-billion deal with elder brother Mukesh Ambani's Reliance Jio. The deal included sale of assets mortgaged with different banks to avoid insolvency proceedings. The company expects to raise Rs 180 billion from sales of its wireless assets to RJio and real estate assets to Canada's Brookfield, and pare some of its Rs 460-billion debt.

RCom’s shares jumped 12 per cent on Friday while the benchmark Sensex was little changed. The company’s stock has dropped 60 per cent so far this year.

Deal gets through

 

• Anil Ambani-led RCom had, in December 2017, signed a Rs 250-billion pact with elder brother Mukesh Ambani's Reliance Jio to sell assets mortgaged with different banks to avoid insolvency proceedings
• The deal faced a roadblock when the telecom department challenged the TDSAT permission to debt-ridden RCom to sell its spectrum to RJio
• The DoT wanted a bank guarantee of nearly Rs 29 billion from RCom or RJio before it could give the sale the go-ahead
• RCom had expressed its inability to furnish the guarantee, arguing that it was undergoing insolvency proceedings
• The SC has asked RCom to furnish Rs 14 billion in two days to get a NoC for the spectrum sale in a week, i.e December 9
• The company expects to raise Rs 180 billion from sales of its wireless assets to RJio and real estate assets to Canada's Brookfield, and pare some of its Rs 460-billion debt

(With Bloomberg inputs)