IT IS CHHOTA BHAI FAVOURING THE BADA BHAI

The Ambanis once again occupied the national headlines yesterday. Mukesh Ambani the bada bhai, bailed out Anil Ambani, the chhota bhai in style. If sources are to be believed Mukesh Ambani simply cut a single cheque of Rs.480 crores as an outright payment, to enable RCom to pay off Ericsson and to settle its dues, to rule out any jail term for Anil Ambani and his colleagues, on charges of contempt of court. Anil Ambani too thanked his brother in style and grace, publicly acknowledging the generosity of his brother and expressing the gratitude of his family too, reaffirming their family ties. With this ends one chapter for RCom ie. settlement of dues of Ericsson and the possible imprisonment of Anil Ambani. But it keeps a much bigger issue open and unanswered ie. settlement of lender dues of over Rs.46000 crores, particularly at a time when the rift between RCom and its forty lenders led by SBI has become even wider, after the refusal of SBI to part with the income tax refunds of Rs.266 crores, which RCom needed and pleaded in order to pay off Ericsson.

It was the NCLAT too which had persuaded SBI to part with this sum of Rs.266 crores to pay Ericsson and had warned it that the banks would get nothing if RCom went into liquidation, which was imminent if the Ericsson dues were not paid. At that time the company court even admonished SBI for deliberately painting a rosy picture and misleading the court by saying that banks expected to recover Rs.37000 crores on account of sale of RCom to RJio.

Even that issue of sale of RCom to RJio, came to an end yesterday, as RCom informed SEBI in a regulatory filing that the agreements dated December 28, 2017 and August 11, 2018, for the sale of RCom to RJio stand terminated with mutual consent. This deal for the sale of telecom spectrum and related assets to RJio by RCom, was worth Rs.18100 crores and would have helped it to substantially reduce its debt by repaying its lenders. RCom said in its filing that the deal was scrapped due to non receipt of consent of the lenders despite 45 meetings in 15 months, the DoT’s refusal to permit the spectrum sale and the NCLAT’s order preventing RCom from selling its movable and immovable property in any manner. It is worth noting that for such spectrum sale, the DoT needs a mandatory undertaking that the buyer will takeover all the liabilities of the seller, which RJio categorically refused to give. It just shows as that the liabilities of RCom are far in excess of its assets and hence the reluctance of RJio to give such an undertaking.

It is clear that all efforts to save RCom from going into insolvency have failed and its liquidation is imminent. With the telecom sector in a total mess, the sole bidder for such assets maybe only RJio. Those very assets, which RCom was selling to RJio for about Rs.18000 crores will now be put up for auction sale by NCLT or sale in any other manner. Even RCom too does not object to its liquidation now, which means that as the NCLAT warned SBI, the banks will get virtually nothing. It thus presents an opportunity to RJio to buy these assets for a fraction of what it had agreed to pay earlier. And there is a valid reason too for it. Fifteen months have elapsed since the sale agreement was signed in December 2017 between RCom and RJio, which is enough time for their value to deteriorate sharply on account of obsolescence and wear and tear. The agreement between RCom and RJio, that was signed in December 2017, kept all others out and now with these developments there could be no worthwhile competitive bids of others. RJio is bound to bid for these assets at a fraction of the original sale price of Rs.18000 crores, leaving the banks high and dry. The bada bhai did bail out the chhota bhai at present, by giving a cheque of Rs.480 crores, but the benefit he will get in return, will be in thousands of crores.