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Reliance ADA group stocks plummet

Reliance Communications has decided to opt for insolvency following failure to sell assets to pay lenders.

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On February 1, RCom decided to opt for insolvency proceedings through the National Company Law Tribunal (NCLT) as it failed to sell assets to pay up its debt of around Rs 45,000 crore. (Express photo by Prashant Nadkar)

Shares of Anil Ambani group companies faced the investors’ wrath and crashed on the stock exchanges after Reliance Communications (RCom) decided to opt for insolvency proceedings following its failure to sell assets for paying back its lenders.

On the other hand, in a relief for RCom, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has exempted RCom’s spectrum holdings in CDMA and GSM bands from a one-time spectrum charge and also directed the Department of Telecommunications (DoT) to return a Rs 2,000 crore bank guarantee made by the debt-laden company.

RCom shares plummeted 34.91 per cent to close at Rs 7.55 on the BSE. Intra-day, RCom nosedived 48.27 per cent to Rs 6, its record low. The company’s market valuation plunged Rs 1,120.02 crore to Rs 2,087.98 crore on the BSE.

Other group company shares also tumbled on heavy selling. Reliance Power tumbled 35.10 per cent to Rs 17.10, Reliance Capital 19.80 per cent to Rs 151.70, Reliance Infrastructure 14.87 per cent and Reliance Naval and Engineering 14.72 per cent on the BSE. The combined market valuation of five of these group firms tumbled Rs 5,830.72 crore on the BSE.

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On February 1, RCom decided to opt for insolvency proceedings through the National Company Law Tribunal (NCLT) as it failed to sell assets to pay up its debt of around Rs 45,000 crore.

“RCom board of directors decides upon implementation of debt resolution plans through NCLT framework,” the company said in a statement. The board of directors of RCom on Friday reviewed the progress of the company’s debt resolution plans since the invocation of strategic debt resolution on June 2, 2017.

RCom’s plan to sell spectrum to Reliance Jio owned by Reliance Industries of Mukesh Ambani did not work out. Swedish telecom firm Ericsson had earlier filed a petition before the NCLT to invoke insolvency proceedings against RCom.

A Reliance Communications Limited spokesperson said: “TDSAT upheld Reliance Communications petition against the DoT, challenging DoT’s decision to impose one-time spectrum charge (OTSC) on its contracted CDMA and GSM spectrum resources. Passing this order, TDSAT held that any telecom operator’s spectrum holdings of up to 5 MHz in the CDMA band and up to 6.2 MHz in the GSM band were exempt from any OTSC levies. TDSAT hence set aside the levy of OTSC on RCOM’s said spectrum.”

TDSAT also directed the DoT to return RCom’s bank guarantee (BG) of Rs 2,000 crore, as per its earlier order passed on July 3, 2018.

On Friday, the RCom board noted that despite the passage of over 18 months, lenders have received zero proceeds from the proposed asset monetisation plans, and the overall debt resolution process is yet to make any headway. “Accordingly, the board decided that the company will seek fast track resolution through NCLT, Mumbai. The board believes this course of action will be in the best interests of all stakeholders, ensuring comprehensive debt resolution in a final, transparent and time bound manner within the prescribed 270 days,” the statement said.

RCom had said this unfortunate outcome is attributable to the unresolved challenges, including lack of 100 per cent approvals and consensus, as mandated by the RBI’s February 2018 circular, on all important issues among over 40 lenders despite the passage of 12 months and over 45 meetings.

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RCom moves NCLAT

Mumbai: The National Company Law Appellate Tribunal (NCLAT) has prohibited the guarantors of Reliance Communications and any third party from invoking any guarantee, mortgage or any other instrument, without NCLAT’s or Supreme Court’s prior permission.

It also asked RCom or any third party not to sell, transfer or alienate any of its assets (movable and immoveable). The Tribunal issued the order after RCom moved the NCLAT for withdrawal of its appeal in the Ericsson matter to pursue the resolution plan through the National Company Law Tribunal (NCLT) process. Accepting RCom’s application for withdrawal of the appeal, the NCLAT directed Ericsson to file its reply in the matter by February 8, 2019. NCLAT further listed the matter for hearing on February 12. —ENS