Anil Ambani sews up yet another revival plan for RCom

Anil Ambani today claimed his beleaguered Reliance Communications has negotiated a new deal with the lenders under which nearly Rs 40,000 crore will be raised through asset sales, averting an imminent takeover by the 35 local and foreign banks.
The revival plan, which also has the backing of the Chinese lender which had dragged it to the National Company Law Tribunal for defaulting on USD 1.8 billion loan, involves sale of RCom's residual spectrum, towers and realty assets, including the 125-acre DAKC, which is the operational headquarters of the group, and also a possible minority stake sale to a strategic investor, Ambani told reporters here.

Through the deal, brokered two days ahead of the December 28 deadline when banks would have taken majority ownership, RCom exits strategic debt restructuring (SDR) and it also involves zero write-offs to lenders, Ambani claimed.
"Today, the fact of the matter is, we've had an understanding and an arrangement with all the lenders to ensure a substantial prepayment, the residual debt to be duly addressed and a viable business model for a new RCom with no risks to the banks by way of conversion or write-offs," Ambani, who flew in from Beijing in the wee hours after convincing China Development Bank, said.

Though the new plan lacked details, the news sent RCom stock rocketing 41 per cent intra-day and closing trade 32 per cent up at Rs 21.33 on BSE.
The plan is part of a "moral finance" drive undertaken by the company which will help protect Reliance and the Ambani family goodwill in the market, he claimed.

At the end of the process, the 'new RCom' will have debt of just Rs 6,000 crore down from Rs 45,000 crore in October, he claimed, adding RCom will serve only the low-capex and high-margin enterprise space hereon.
At present, the lenders have only approved the plans presented by RCom and respective deals should be consummated by March or June 2018 resulting in fund accrual, he said.

In June, RCom had entered an SDR that involved bankers taking majority control. At that time, Ambani had exuded confidence of successfully coming out of the crisis by selling the tower business to Brookfield and also merging with Aircel.
However, both the deals fell through and RCom had to go back to the drawing board to present a new debt reduction plan in October, which spoke about a wider asset monetisation plan. It was forced to exit its consumer-facing wireless business in November.
The same plan has been approved by lenders after progress on each of the programmes, which include scrutiny of expressions of interest, followed by either binding or non- binding bids, Ambani said.

It can be noted that the once-sunshine telecom industry has been bleeding through the nose ever since Reliance promoted-Jio entered the market in September 2016 with loads of free data for months and then at dirt-cheap tariff plans. The biggest surprise was merger announcement of Vodafone with Idea this March and the Tatas almost exiting the business by selling out to Airtel in a distress sale.
Ambani today said RCom has received 75 expressions of interest and 15 non-binding offers for selling its spectrum, towers and realty assets excluding the Dhirubhai Ambani Knowledge City (DAKC).
To a question on whether his elder brother promoted Reliance Jio is the front-runner for the spectrum, he said multiple operators are in the fray and that spectrum will be sold on a piecemeal basis where individual operator will bid as per its requirements based on each circle.

RCom hopes to reduce debt by Rs 25,000 crore through the new plan, he said, adding an oversight committee headed by former RBI deputy governor SS Mundra and ex-Trai officials has sifted through bids and advance talks are on. The entire proceeds from the deal will be used to prepay loans, he said.
For the 125-acre DAKC, where the company has built 1.62 million sqft space, there is further headroom to expand the built-up area to 20 million sqft, and the company has spun an SPV to house the assets, which will be sold.
HDFC Realty had valued DAKC at Rs 25,000 crore and the successful bidder will help reduce RCom's debt by Rs 10,000 crore, he claimed, adding these twin asset sale programmes will help reduce the domestic banks' exposure to the telecom sector by Rs 21,000 crore.

Apart from asset sales, RCom has also begun a process to find a strategic investor who can take a minority interest, Ambani said, hinting that the process may end by next June as a strategic investment takes longer.
He, however, did not specify the amount RCom plans to raise from the process or the exact stake it plans to part with. It received 27 expressions of interest and nine non- binding offers for the sale, Ambani added.
Ambani said RCom conducted a long meeting with the lenders recently where the plan was discussed.
Accompanied by wife Tina and son Anmol, Ambani, who got control over the telecom assets following a very bitter feud with his elder brother Mukesh following their father Dhirubhai's death in 2002, said it has been a daunting process in which he learnt a lot.

"I hope as a group and RCom, we never ever have to understand, appreciate, analyse or face an IBC, an NCLT or an SDR or any such process ever," he said.