Ambani’s Reliance sees mounting debt troubles

Brutal competition and 457 billion rupees (RM29.97 billion) of borrowings have finally caught up with billionaire Anil Ambani’s Reliance Communications Ltd.

The Indian wireless operator rattled investors with its first full-year net loss amid signs it’s struggling to repay debt.

Its US$300 million (RM1.28 billion) junk-rated note due in 2020 declined US$0.055 cents on the dollar to US$0.66 as of 12.23pm in Hong Kong, and the stock sank 4.4 per cent to extend Monday’s 20 per cent slump.

Fitch Ratings and Lucror Analytics highlighted a potential liquidity crunch and people familiar with the matter said the company sought more time to repay some loans.

The company was in talks with its lenders to seek their approval for the sale of its tower business and an equal merger of its wireless business with rival Aircel Ltd, that would allow it to pare debt by 250 billion rupees, said Gurdeep Singh, co-chief executive officer of Reliance Communications on an investor call on Monday.

The company planned to refinance its debt in the interim period until September 30 to facilitate the closing of the transactions, said Singh.

Reliance Communications had a full-year loss of 14 billion rupees. Subscribers have dwindled in the past five years as larger rivals, such as Bharti Airtel Ltd and Vodafone Plc, slashed call rates and offered higher speed data. To repay debt, the company is selling its towers to Canadian asset manager Brookfield Infrastructure Group, as well as merging the wireless business with Aircel Ltd.

Reliance Communications’ cash generation and unrestricted cash of around US$200 million would be insufficient to pay its short-term debt of around US$600-$650 million, said Nitin Soni, Asia-Pacific corporate ratings director at Fitch Ratings.

However, liquidity would still be dependent on its ability to refinance maturing debt, said Soni.

The junk-rated company had 13.2 billion rupees of cash and cash equivalents as of March 31, less than a quarter of its shortterm borrowings of 95 billion rupees, it said in its earnings report on May 27.