Lenders plan to put Reliance Communications HQ in Navi Mumbai on sale

The Committee of Creditors of the bankrupt Reliance Communications is planning to put the company’s headquarters in Navi Mumbai on sale after its debt resolution under the Insolvency and Bankruptcy Code failed to make any progress due to the ongoing litigation.

The CoC is planning to set up a committee consisting of two lenders and the resolution professional to identify the buyer. The CoC is not calling it a liquidation of assets as an earlier proposal to sell the company to UV ARC is still pending in court, said a source close to the development. The lenders are expecting up to Rs 5,000 crore from the sale of Dhirubhai Ambani Knowledge City, which is spread over 56 hectares near Mumbai.

UV ARC, which was the highest bidder for the company, could not close the transaction as the Reserve Bank of India barred asset reconstruction companies from bidding for bankrupt companies under the Insolvency and Bankruptcy Code, 2016. Later, after the RBI allowed ARCs to bid, UV ARC became ineligible to acquire Reliance Communications as it was not meeting the RBI criteria on net owned funds of Rs 1,000 crore. Besides, the Indian government also did not allow transfer of spectrum to a new owner under the IBC. The matter is under litigation.

The Indian lenders had sent the company, earlier owned by Anil Ambani, for debt resolution in May 2018 after the company failed to repay its then debt of Rs 45,000 crore. Since then the company’s licence has expired and tenure of spectrum is coming to an end, making the company unattractive.

A banking source said the Delhi-based UV group has made an application to the CoC, asking whether RCom could be allowed to be taken over by another company of the group if ARC is not allowed to bid. No decision has been taken as yet on the application.

UV ARC was also the highest bidder for bankrupt Aircel, another wireless telephone company. If lenders allow UV group to change acquisition by another company for Reliance Communications, then UV may make a similar application for Aircel, which owes Rs 20,000 crore to Indian lenders when it was sent for debt resolution.

In November last year, Reliance Jio secured National Company Law Tribunal nod to acquire Reliance Infratel, a subsidiary of Reliance Communications, after months of delay and litigation. The NCLT allowed Jio’s application to deposit the resolution amount of Rs 3,720 crore to a State Bank of India account after almost two years.

While Jio was the preferred bidder for Reliance Infratel, which has towers and optic fibre assets, UV ARC’s bid was chosen for RCom and Reliance Telecom which had spectrum.

A brain child of billionaire Mukesh Ambani, Reliance Infocomm was set up as a subsidiary of Reliance Industries in 2002. In 2005, the wireless telephone business was transferred to Anil Ambani as part of the family settlement with his brother, Mukesh Ambani. A year later, its name was changed to Reliance Communications.

Under Anil Ambani, RCom emerged as one of India's integrated telecommunications service providers offering voice services, fixed line broadband to its customers. In 2010, Mukesh Ambani decided to re-enter wireless telecom services after the no-compete agreement with Anil was terminated. By 2016, Reliance Jio launched wireless telephone services based on 4th generation-based technology and was an immediate hit among its customers. The launch of Jio, now India's biggest network, hit several incumbent players including Reliance Communications and Aircel.

Reliance Communications had to shut down its business operations by 2019 as a result of its high debt and a failed merger with Aircel. Since then, the lenders are trying to resolve it's debt under IBC.

The Dead End

2002: Reliance launches wireless telephone as Reliance Infocomm

2005: RIL transfers wireless telephone business to Anil Ambani

2010: Reliance Industries re-enters wireless telephone sector after no-compete with Anil is terminated

2019: RCom sent for debt resolution under IBC

2020: UV ARC emerges as highest bidder for Reliance Communications but RBI disallows ARC to acquire companies under IBC

2021: Aircel, RCom’s spectrum in several circles expired since IBC process began

2022: RBI changes rules to allow ARCs with Rs 1,000 cr of NOFs to acquire cos; UV ARC disqualified while govt disallows transfer of spectrum