Mukesh bails out younger brother Anil Ambani, what now for RCom?

With an opera like drama playing out in the annals of the Indian business community last evening, we were all kept at the edge of our seat throughout. The spectacle was such that one of the country’s best known businessmen, Anil Ambani, was just hours away from being imprisoned for non payment of dues to the tune of 453 crore ₹ to Swedish telecom equipment maker Ericsson, when, just in the nick of time, his elder brother, who just happens to be the richest man in Asia, Mukesh Ambani, bailed him out by clearing his dues in full, saving his younger sibling the wrath of the Supreme Court. Anil Ambani was grateful, and made the following public statement “My sincere and heartfelt thanks to my respected elder brother Mukesh, and Nita, for standing by me during these trying times, and demonstrating the importance of staying true to our strong family values by extending this timely support”.

Let us not forget that the two brothers fought a bitter public battle after their father, Dhirubhai Ambani died without leaving a will. They split his businesses between themselves, with Mukesh getting the oil and petrochemical businesses for himself and Anil retaining telecom and power.

So, this scenario begets the question, have India’s most well known duo, the Ambani brothers, finally mended their relationship and reconciled their differences? Or is this just a temporary arrangement of convenience?

In December of 2017, a deal was entered into whereby RCom would sell spectrum, fibre network and telecom towers to RJio for an estimated 18,000 crore ₹, which would help Anil Ambani pare his 46,000 crore worth of debt in Reliance Communications. However, the deal between the two Ambani brothers has fallen through with both respective companies i.e. RCom and RJio agreeing to terminate the asset sale agreement on Monday. The reason cited was delays in approval from the government and non consent of lenders.

Now, this paves the way for RCom to resolve its debt through the insolvency process via the NCLT, and, what is interesting to note is that the shelf life of spectrum is very less and its valuation would be affected till the conclusion of the NCLT process, thereby paving the way for RJio to pick up the assets at a heavily discounted price, which will more than compensate the Mukesh Ambani led telecom major, for the 460 crores it paid to Ericsson to bail put the beleaguered RCom.