Having asked for a 10-day extension from a Resolution Professional, Mukesh Ambani’s Reliance group is expected to make a bid for his brother Anil Ambani’s Reliance Communications (RCom) and its related companies on Monday.
The companies are up for grabs as going concerns from the Anil Ambani stable under the Insolvency and Bankruptcy Code (IBC) process. They include RCom, Reliance Telecom (which has the spectrum), and Reliance Telecom Infrastructure which houses the tower and fibre assets. Rcom also has subsidiaries which control its real estate and data centre businesses. The bids close on Monday and it is expected that the committee of creditors will open them on the same day for discussions.
The structure of how the bid will be made is not clear as, under the regulatory rules, a bid by Reliance Jio (which is not a listed entity) acquiring RCom (a listed entity) would require the former to merge the latter. Yet that is clearly not acceptable to the group which is looking at coming out with a separate IPO for Jio. An e-mail to Jio elicited no response.
It is also expected that Bharti Airtel, which had complained to the Resolution Professional that the extension given to Mukesh Ambani was unfair and had withdrawn its offer, might reconsider and also bid.
The others expected to put in bids include US-based PE fund Varde Partners, I Squared Capital (for Reliance Communication’s data centres and optic fibre assets), and Delhi-based UV Asset Reconstruction Company. The latter had earlier won its sole bid for the Aircel group (which was also under the IBC) for Rs 150 crore.
Bharti had already earlier announced that it would be making a conditional bid through Bharti Airtel and Bharti Infratel. A Bharti spokesperson had at that time confirmed that it had made a conditional bid primarily for the spectrum — a precious asset.
The bid conditions included that the overall consideration will primarily be in the form of the deferred spectrum payable to the government being passed on to the bidder on terms and schedules applicable to such deferred payments. The firm has refused to comment. The Interim Resolution Professional had invited prospective companies to make a bid for Anil Ambani’s companies as going concerns that had not just 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 the secured creditors.
The Resolution Professional, Anish Nanavaty, who had earlier granted the 10 day extension to Mukesh Ambani, did not respond to a query on the likely bidders tomorrow or the committee of creditors meeting. Jio has been using the 58 Mhz of Reliance Communications 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.
Last year, Jio had also signed an agreement to buy assets which included 43,000 telecom towers, 178,000 kilometres of fibre network across the country, and the valuable spectrum but the deal did not materialise because the Department of Telecommunications insisted that Jio or Reliance Communications’ promoters must give an undertaking that they will be responsible for paying any 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, Reliance Communications went to the National Company Law Tribunal.
The sale of Reliance Communications has become more complicated with the Supreme Court order on adjusted gross revenue demanding that the firm 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 the prospective new buyer pay the past dues.
Some experts say a conditional offer by Bharti for the spectrum might make immense financial sense for the company. However, analysts say that as the bid is for the three companies as going concerns, it is unlikely that a conditional offer only for the spectrum would be accepted.
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.