Under pressure from lenders, the restructuring of billionaire Anil Ambani’s mobile-to-metro conglomerate is turning into a summer sale.
Companies controlled by Ambani are trying to sell road assets, an undersea cable business and prime real estate in Mumbai and New Delhi. That’s on top of a deal to divest the group’s phone transmission towers and merge its wireless operations with Aircel Ltd. And if that isn’t enough, finance units announced two initial public offerings within a week.
With banks cracking down on borrowers and Ambani’s once high-flying mobile phone business being hammered by his brother Mukesh’s rival Reliance Jio Infocomm Ltd., Anil aims to raise over $4.5 billion this year to help reduce group debt that’s at least three times that.
The Reserve Bank of India has stepped up pressure on commercial lenders to send delinquent borrowers to the bankruptcy courts if they don’t pay up, to pare the nation’s $180 billion of bad loans. Banks in turn are pressing heavy borrowers like Anil’s phone unit, to recover loans that haven’t gone bad. None of Ambani’s group companies has yet missed the 90-day payment deadline that would categorize their loans as non-performing assets.
“RBI is pushing the banks, banks are pushing the company founders and the company founders are pushing the asset sales,” said Chakri Lokapriya, Mumbai-based managing director of the Indian arm of TCG Group, which oversees around $3 billion. “Some of these assets should have been sold three to four years back.”
Banks that lent to Anil’s companies such as Reliance Communications Ltd. have met with executives from the group to push for a reduction in debt by selling assets, according to people familiar with the matter, who didn’t want to be named because the talks were private. Anil Ambani told reporters on June 2 that RCom’s debt reduction plan would be the largest in India’s history and would create long-term value for shareholders. A spokesman for the unit declined to add to Ambani’s comments. A group spokesman didn’t provide details of efforts to reduce group-wide debt.
RCom, as the wireless unit is known, got a seven-month reprieve from lenders this month in order to raise money from deals. It’s weighed down by $6.9 billion of debt and is losing money after a bruising mobile price war started by Anil’s elder brother. Mukesh’s Reliance Jio launched its own service in September offering free phone calls for life and free data in the initial months. Since then, RCom’s shares have fallen nearly 61 percent, after the stock was downgraded on fears that the company might default on some loans.
Some foreign lenders to the company are protesting after being excluded from signing off on RCom’s plans and have sought more information. The National Company Law Tribunal in Mumbai on Wednesday asked the company’s creditors, including China Development Bank and HSBC Holdings Plc., to file objections to the proposed transactions within 10 days. The court will next hear the matter on July 27.
While the selloffs would help some of Anil’s companies bolster their credit status for future expansion, other units are just taking advantage of Indian investors’ current appetite for shares, which has pushed up the benchmark stock index nearly 16 percent this year.
The proposed share sales by Reliance General Insurance Co. Ltd. and Reliance Nippon Life Asset Management Ltd. were not to pay debt but to unlock value, their parent company Reliance Capital Ltd. said. The company declined to say what the sale proceeds would be used for.
Here’s a rundown of Anil Ambani’s planned or proposed sales within the next three to nine months, together with estimates from analysts or company reports on the amount each might raise:
- An IPO of 10 percent of Reliance General Insurance, a unit of Reliance Capital. Estimated value: 5 billion to 8 billion rupees.
- An IPO of 10 percent of Reliance Nippon Life Asset Management. Estimated value: 11 billion to 20 billion rupees.
- A private sale of the undersea-cable unit Global Cloud Xchange. Estimated value: about $500 million.
- Sale of real estate in New Delhi and on the outskirts of Mumbai, where it has 133 acres that house the group’s offices, a helipad and medical facilities, a lake and temple. Estimated value: 110 billion rupees.
- An IPO of an infrastructure trust that bundles together seven road assets. Estimated value: 25 billion rupees.
- A private sale of majority stake in RCom’s transmission towers to Brookfield Infrastructure Group. Estimated value: 110 billion rupees upfront, with RCom retaining 49 percent “future economic upside.”
- A merger of RCom’s wireless operations with Aircel. This would reduce debt by 140 billion rupees by transferring the amount to the new entity, Aircom.