Four companies, including Mukesh Ambani’s Reliance group and Bharti Airtel, on Monday collectively submitted 11 bids for three Anil Ambani group companies, which are up for sale as going concerns as part of the Insolvency and Bankruptcy Code (IBC) process.
The three companies for sale are Reliance Communications (RCom), Reliance Telecom (which holds the spectrum), and Reliance Infratel (which controls the tower and fibre assets). RCom also owns real estate and enterprise businesses.
The bids were opened by the committee of creditors, which held a meeting that continued until late night on Monday in Mumbai. It will meet again on Friday to discuss and possibly finalise the winning bids for the three companies
The value of the financial bids as well as which companies they have bid for, however, could not be ascertained.
The two other bidders include Varde Partners and Delhi-based U V Asset Reconstruction Company (UVRCL). The latter had earlier won its sole bid for the Aircel group (which was also under the IBC) for Rs 150 crore. However, it is unclear as to whether UVRCL will eventually bring in a telecom or infrastructure partner to join in later. A Reliance Jio spokesperson did not respond to a query and an e-mail to UVARCL remained unanswered.
Under the current regulatory rules, Reliance Jio (which is not a listed entity) acquiring RCom (a listed entity) would require the Mukesh Ambani firm to merge with the latter. However, based on public pronouncements, this is not a possibility — Mukesh Ambani had made it clear that he will take Reliance Jio public through an IPO some time. Sources say that one other alternative would be to delist RCom, as then there would not be any regulatory issues in a merger between the two unlisted companies. Another alternative would be to float a special purpose vehicle to buy the firms.
Bharti Airtel had already given a bid on November 13, the earlier deadline for the bids. But the RP on the request of Reliance had extended the bid deadline by 10 days. The telco protesting against the extension had decided to withdraw its previous bid.
While Bharti Airtel spokesperson did not respond to a query, in its earlier offer it had made a conditional bid for the spectrum. The bid, it said, include that the overall consideration will primarily be by way of the deferred spectrum payables to the government being passed on to the company on terms and schedules applicable to such deferred payments.
Interim Resolution Professional Anish Nananvaty had invited prospective companies to make bids for Anil Ambani’s companies as going concerns that do not just have valuable spectrum and a fibre network but also real estate and enterprise business, as a way of recovering over Rs 33,000 crore of debt of secured creditors.
Jio has been using the 58 MHz of RCom spectrum in the 800 MHz band across 21 circles through a spectrum-sharing agreement signed earlier with his brother. This spectrum has been crucial for 4G services. The licence for the spectrum ends in 2021. It is also the sole tenant of its towers after RCom closed operations. RCom has over 122 MHz of spectrum.
Last year, Jio had signed an agreement to buy assets which included 43,000 telecom towers, 178,000 km of fibre network across the country, and use of valuable spectrum for around Rs 25,000 crore. But the deal did not materialise because the Department of Telecommunications insisted that Jio’s or Reliance Communications’ promoters give an undertaking that they will be responsible for paying past dues. Jio refused to give an undertaking. Even the creditors could not come to a consensus on whether to clear the asset sale. Consequently, RCom went to the National Company Law Tribunal.
Even before this deal, RCom in 2017 was looking at selling 51 per cent of its tower business for Rs 11,000 crore to Brookfield, valuing the assets at over Rs 22,000 crore. However, most analysts believe that the current sale will be at a substantial discount from what Reliance Jio or Brookfield was willing to pay.
The sale of RCom has become relatively complicated with the Supreme Court order on adjusted gross revenue demanding that the company fork out over Rs 16,456 crore. This does not include spectrum user charges. With its mobile business non-operational, the DoT, say analysts, could demand that the prospective buyer pay the past dues or it be treated as a creditor like the banks. That might not auger well with the creditors who are could be bracing for a substantial haircut.
Experts say a conditional offer by Bharti Airtel for the spectrum might make financial sense for the company rather than buying it in an auction.
In the case of Jio, it has already spun off its tower business into an Infrastructure Investment Trust and given 51 per cent to a consortium led by PE fund Brookfield for Rs 25,000 crore as part of its monetisation plan for its assets. It is also looking for a similar deal for its fibre assets.
The story so far
- May 9: NCLT admits Anil Ambani-led RCom for insolvency proceedings
- June 21: NCLT appoints Anish Nanavaty from Deloitte as resolution professional
- September 21: NCLT allows RP additional 90 days to complete insolvency proceedings
- November 13 : Reliance asks for 10-day extension for the last date of bidding for RCom and related companies. It is granted
- November 16: Bharti group withdraws its expression of interest in protest against the RP giving Reliance an extension
- November 18: Four directors, including Anil Ambani, resign from the board of the company
- November 24: Committee of creditors asks them to continue as directors till the insolvency proceedings are completed