Reliance Industries may bid for Anil's RCom in bankruptcy

Mukesh Ambani's Reliance Industries may bid for Anil's RCom in bankruptcy

Billionaire Mukesh Ambani-controlled Reliance Industries (RIL), India's largest company by market capitalisation, may become the first company to throw its hat into the ring for bankrupt firm, Reliance Communications (RCom), which was the flagship company of his younger brother Anil Ambani's group. 

According to highly placed sources, Reliance Jio plans to submit the bid for the assets of RCom that will come up for sale during the insolvency process.

With that deal now off, RCom is likely to go into a court-led process that may provide Mukesh's Jio another shot at buying up the carrier's airwaves, towers and fiber. What's more, he may get them for less than the 173 billion rupees ($2.5 billion) Jio agreed to pay a year ago given the weak financial health of India's other telecom operators.

HIGHLIGHTS

• Sources say Reliance Jio is planning to bid for RCom assets during insolvency proceedings

• Jio is also keen on buying Dhirubhai Ambani Knowledge City owned by RCom

• Jio had earlier tried to procure RCom's infrastructure assets but the deal collapsed

According to an HDFC Realty study, quoted by Anil Ambani at the company's shareholders' meet in 2018, the DAKC is estimated to be over Rs 25,000 crore.

Reliance Jio had earlier tried to acquire RCom's 122.4 MHz of spectrum in the 850 MHz band for Rs 7,300 crore, but the deal was shelved after the Department of Telecom (DoT) did not grant approval. The DoT had denied permission as Jio refused to bear RCom's astronomical debt (RCom currently owes around Rs 46,000 crore). Jio is already using RCom's airwaves in the 850 MHz band in 21 circles.

Cheaper For Jio

“Jio may have scrapped the asset purchase deal with RCom, but it cannot be ruled out that Jio will try and participate in the purchase,” under the bankruptcy process, said Saurav Kumar, a New Delhi-based partner at IndusLaw, an Indian law firm. That “may eventually be cheaper for Jio.”

A lower price for RCom’s assets would mean deeper haircuts for lenders trying to recover some of the $7 billion in debt the unprofitable operator had as of March 2018.

“India’s bleeding telecom sector will probably keep auction prices low,” allowing Jio to spend less on acquiring RCom’s spectrum, Kunal Agrawal, a Bloomberg Intelligence analyst said in a March 19 note.