Mukesh Ambani bails brother out of jail trouble

Billionaire steps in to settle Anil’s US$80mil debt

NEW DELHI: Asia’s richest man Mukesh Ambani has helped his younger brother avert a stint in jail, stepping in to make a US$80mil payment for his sibling whose telecom-to-infrastructure empire is struggling with debt.

The embattled former billionaire, Anil Ambani, thanked his brother Mukesh and sister-in-law after Anil’s Reliance Communications Ltd completed the required 5.5 billion rupee (US$80mil) payment to a local unit of Ericsson AB for past maintenance services provided to his group. Repeated failures to pay and Anil’s personal guarantee landed him in trouble in February, with India’s top court giving him a month’s notice to comply or face prison.

“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,” Anil said in a statement issued by Reliance Communications. “I and my family are grateful we have moved beyond the past, and are deeply grateful and touched with this gesture.”

The last-minute twist shows family ties appear to have won out despite the brothers’ fraught relationship over more than a decade. The scions of one of India’s richest families have feuded over control of an empire left behind by their father.

After Mukesh and Anil carved up the conglomerate, the older brother’s oil and petrochemicals business flourished, while Anil’s businesses ranging from telecommunications to power and infrastructure strained under massive debt. He has fended off creditors in multiple court cases.

The younger brother’s net worth has shrunk to about US$300mil from at least US$31bil in 2008 based on the current foreign-exchange rate, according to data compiled by Bloomberg. His stunning fall stands in contrast to the success of Mukesh, whose net worth is US$54.3bil and has increased US$10bil this year alone, according to the Bloomberg Billionaires Index.

The decline in Anil’s wealth ranks among the largest and fastest implosions in modern history, ranking alongside the reported US$70bil loss Japan’s Masayoshi Son suffered during the dot-com crash after his SoftBank Group Corp’s stock tumbled.

Brazil’s Eike Batista was worth more than US$30bil at the start of the decade, according to the index. But his commodities and logistics empire evaporated under a mountain of debt and insider trading investigations. Batista gained the rare distinction of “negative billionaire” in 2015 when his net worth sank to more than US$1bil in debt.

The bailout money was an outright grant from Anil’s elder brother, the Times of India reported, citing a person working for Anil’s group.

Shares of RCom, as Anil’s telecommunications carrier is known, surged 10% as of 9:15am in Mumbai yesterday following the payment. The stock plummeted 60% in 2018 as Anil struggled to close a 2017 deal to sell spectrum, signal towers and fiber to Reliance Jio Infocomm Ltd, a new service provider controlled by Mukesh, for 173 billion rupees.

RCom said on Monday that the two companies have mutually agreed to terminate the pact, adding RCom is committed to “a comprehensive resolution” of overall debt through India’s National Company Law Tribunal.

Reliance Power Ltd shares gained as much as 8.6%, while Reliance Infrastructure Ltd jumped 8.2% and Reliance Capital Ltd gained almost 6%.

As regulations delayed the completion of Anil’s biggest deal, creditors such as Ericsson began demanding past dues. The Swedish equipment maker’s relentless legal pursuit led to a settlement under which RCom was to pay half of the past claims, or 5.5 billion rupees - an offer backed by a personal guarantee from Anil.

Failure to keep this promise after a personal guarantee from Anil saw the situation escalate into a contempt case, with the court eventually setting the payment deadline.

The threat of a prison term if Anil didn’t make the payment also came as a rare warning to some of India’s richest borrowers whose firms have turned defaulters over the past few years. The nation’s policymakers and courts have been cracking down on delinquency to help banks saddled with the world’s worst bad-loan ratio.