The National Company Law Tribunal (NCLT) has admitted Reliance Communications Ltd petition for its merger with telecom firm Aircel Ltd and its 51% stake sale in its telecom tower arm to Canada-based Brookfield Infrastructure group.
Reliance Communications (RCOM) rallied more than 19% to Rs 24.65 on BSE in intraday trade and closed at Rs 23.9 up by Rs 3.15 on the back of heavy volumes. The Reliance Communication stock has underperformed the market by falling 29% since January as compared to 17% rise in the S&P BSE Sensex.
The National Company Law Tribunal (NCLT) has admitted Reliance Communications Ltd petition for its merger with telecom firm Aircel Ltd and its 51% stake sale in its telecom tower arm to Canada-based Brookfield Infrastructure group. The court is due to issue its final order on 13th September.
RCOM and Aircel had already received approvals for the merger scheme from the Stock Exchanges, the Securities and Exchange Board of India (SEBI), the Competition Commission of India (CCI) and the shareholders of both companies. Earlier, while announcing the quarterly results, Reliance Communication said referring to the transactions, “As part of this transaction, RCOM’s overall debt will reduce by Rs 14,000 crore, together with transfer of liability for spectrum installments of an additional approximately Rs 6,000 crore.” Upon completion of the Aircel merger and sale of the tower business, RCOM’s debt will stand reduced by approx. Rs 25,000 crore, or 60%, it added.
Reliance Communications is merging its wireless business with rival Aircel and is also selling a 51 percent stake in its radio masts business to Canada’s Brookfield Infrastructure Group for Rs 10,000 crore. The Anil Ambani-controlled company, which has delayed repayment of loans to more than 10 banks, plans to repay Rs 25,000 crore worth of loans to its lenders with proceeds from its deals with Aircel and Canada’s Brookfield Infrastructure. The firm needs to complete its merger and stake sale in tower business by December.
Banks have given seven months to Reliance Communications to conclude the two deals and get the proceeds. This resolution by the lenders has allayed the fears of a potential loan default by a company, which could be credited with bringing the mobile phone telephony to the masses in India.
Earlier this year, ratings agencies Fitch and Moody’s this week downgraded Reliance Communications’ debt rating deeper into junk grade, spelling fresh troubles for the company. 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”.