It was a close shave for Reliance Communications as rival telecom service provider Aircel, with which the Anil Ambani-controlled firm is in the process of merging, was reported to be contemplating filing for bankruptcy. Shortly thereafter, Aircel denied the reports, saying that the business at the company was going on as usual, but not before the news had knocked more than 7% off RCom shares at the end of Friday’s close.
However, it doesn’t mean the trouble has ended for the debt-ridden Reliance Communications. It has been a pretty tough week for the company as earlier on Wednesday, Ericsson India filed insolvency petitions to seeking to Rs 1,156 crores from it.
If the National Company Law Tribunal (NCLT) admits the insolvency petitions by Ericsson, it could block the way of RCom’s proposed merger with Aircel, and its plans to repay Rs 25,000 crore worth of loans to its lenders with proceeds from its deals would get stuck in limbo. The telco’s gross debt at the end of March 2017 stood at Rs 45,000 crore.
As news of Aircel filing for bankruptcy broke, Reliance Communications’ shares tumbled nearly 7 per cent at Rs 19.95 on NSE just before the market closed. Aircel has a debt of Rs 16,000 crore, of which Rs 12,000 is from India and rest, overseas. Aircel, owned by Malaysian firm Maxis, is pledged with a consortium of SBI-led banks, CNBC-TV18 reported.
Reliance Communications’ shares also dipped 2.6 per cent in an early trade on Thursday, after Ericsson India filed insolvency petitions against the debt-laden telecom company and its subsidiaries. Ericsson India had also objected to the possible merger between Reliance Communications and Aircel, seeking a creditors’ meeting. Besides Ericsson India, Chennai Network Infrastructure — a GTL subsidiary — and Bharti Infratel had also objected to the possible merger.
Reliance Communications reported its third quarterly loss in a row last month. It is trying to find ways to cut debt after lenders gave it a reprieve on loan repayments until the end of 2017.
Earlier this year, rating agencies Fitch and Moody’s downgraded Reliance Communications’ debt rating deeper into junk grade. Moody’s cut it to Caa1 from B2, while Fitch lowered its rating on the company to CCC, implying that some kind of default on the company’s debt is a “real possibility”.