RCom shares hit as insolvency rule hampers Mukesh Ambani's bailout bid
17 May 2018
Shares of Anil Ambani firm Reliance Communications (RCom) nosedived as much as 20 per cent on the Bombay Stock Exchange (BSE) on Wednesday after the insolvent company’s administrator allowed creditor Ericsson to initiate bankruptcy proceedings against the company, thereby hampering a bailout proposal by elder brother Mukesh Ambani through his telecom arm Reliance Jio Infocomm Ltd.
The Mumbai bench of the NCLT on Tuesday admitted three petitions filed against the telco and its subsidiaries by Swedish telecom equipment maker Ericsson under the Insolvency and Bankruptcy Code.
The development may jeopardise RCom’s Rs18,000-crore deal to sell its wireless assets to Reliance Jio Infocomm to pare its Rs46,000 crore debt.
The company’s bonds also took a hit, while shares of group companies also fell.
Insolvency proceedings prohibit “connected persons” from acquiring assets of delinquent borrowers, which effectively debars “connected persons” brother Mukesh Ambani and his Reliance Jio from acquiring assets of delinquent borrower Rcom.
RCom is now under insolvency proceedings, which prohibit related parties from acquiring its assets.
Billionaire Mukesh Ambani’s prospects for bailing out his younger brother’s phone company are fading after an Indian tribunal put his sibling’s Reliance Communications Ltd into Ambani is India’s richest man and the founder of upstart rival
Reliance Jio Infocomm Ltd, which is also partly responsible for the demise of RCom, had, in December last year, agreed to pay about $3.7 billion for airwaves, towers and fiber assets of RCom.
Insolvency administrators will now oversee disposal of RCom assets under rules that could bar Reliance Jio and Mukesh Ambani from bidding for them.
The Ambani brothers are majority shareholders and part of management of their respective companies, and this could make Jio ineligible to bid.
While Jio and RCom did not comment on the insolveny process, it is expected that both companies will decide on the course of action after the entire court order is available, RCom stated in an exchange filing.
RCom is the second operator, after Aircel, to be hauled through bankruptcy proceedings.