Mukesh Ambani’s Reliance Jio Infocomm and Delhi-based UV Asset Reconstruction Company (UVARC) are learnt to have emerged the highest bidders for the assets of Reliance Communications (RCom) and its subsidiaries, according to banking sources.
The combined bid amount is Rs 21,000 crore.
The Anil Ambani-run company went through the insolvency process, and was referred to the National Company Law Tribunal (NCLT) in May last year after an offer from Reliance Jio to buy its assets did not find favour with the creditors. The conditions imposed by the department of telecommunications too were a hindrance.
The resolution professional (RP) was appointed in June.
Sources say in a meeting of the committee of creditors (CoC), which ended late in the evening on Monday, Reliance Jio, part of Reliance Industries, agreed to marginally up its earlier offer and is willing to pay about Rs 4,700 crore for the tower and fibre assets of Reliance Infratel.
Delhi-based UVARC has offered to pay about Rs 16,000 crore for the spectrum, real estate, and enterprise and data centre businesses of RCom and Reliance Telecom, which houses these assets. The bidders are believed to have committed themselves to paying 30 per cent of the proceeds within 90 days.
Email queries sent to Reliance Jio and UVARC did not elicit any response. An email to RP Anish Nanavaty also went unanswered.
The 38 lenders to RCom are expected to recover 75 per cent of the Rs 33,000-crore outstanding loans, but that is much more than what banks were able to salvage in the case of another telco, Aircel, which went to the NCLT. In that case, they took a haircut of over 99 per cent on the outstanding dues of Rs 20,000 crore. Even here it was UVARCL that won the bid, agreeing to pay upfront Rs 150 crore. The ARC’s plan was to sell fibre and other telecom assets to recover some bank dues.
Apart from the money from the bidders, the RCom lenders, according to sources, will also claw back the priority payments of Rs 4,300 crore made to Chinese and Indian lenders, which is permitted under the Insolvency and Bankruptcy Code. Without the clawback, the recovery by the banks of their outstanding guaranteed dues would go down to 63 per cent.
The members of the CoC will obtain approval from their respective boards for a final vote on January 31 to clear the resolution plans ahead of the National Company Law Tribunal filing, due by February 3. RCom and its subsidiaries received three bids which apart from Jio included Bharti Airtel and private equity fund Varde Partners. Bharti Airtel had made an offer of around Rs 9,500 crore but it did not include the real estate and the payment would be staggered based on the payment for the spectrum according to the deferred spectrum plan of 16 years.
The non-listed UVARCL which has recently focused on distressed telecom assets, however it is not clear whether they will eventually tie up with a telco or an infrastructure player in order to monetize the assets. Reliance Jio has however concentrated on buying the tower and fibre assets of Reliance Infratel. Experts say that Jio which is planning an IPO, would find it difficult to bid for RCom and Reliance Telecom as under the rules a non-listed entity (Reliance Jio) has to merge with the listed entity (RCom), which in this case is not possible. Interim Resolution Professional Anish Nananvaty had invited prospective companies to make bids for Anil Ambani’s companies as going concerns, which do not just have valuable spectrum and a fibre network but also real estate and an enterprise business.
Jio has been using 58 MHz of RCom spectrum in the 800 MHz band across 21 circles through a spectrum-sharing agreement signed. In total it has over 188 MHZ of spectrum. Much of the spectrum in the 800 MHZ band is crucial for 4G services.
The license for the spectrum ends in 2021. Jio is currently the sole tenant of its towers after RCom closed down operations.
Reliance Jio last year signed an agreement to buy RCom’s assets including 43,000 telecom towers, 178,000 km of fibre network across the country, and valuable spectrum, for around Rs 25,000 crore. But the deal did not fructify because the Department of Telecommunications insisted that Jio’s or RCom’s promoters give an undertaking that they would be responsible for paying the dues of the past. 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. 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 more than Rs 22,000 crore. However, the current sale will be at a substantial discount to what Reliance Jio or Brookfield was willing to pay. The companies also have substantial real estate in Delhi, Kolkata, Chennai and in Navi Mumbai.