Will RCom Go The Aircel Way? No, Say Bankers

Aircel’s fate, which symbolises the troubles that India’s telecom industry has gone through over a turbulent decade, led to concerns that banks would need to take steep haircuts in the resolution process of other stressed telecom firms. Most notably— Reliance Communications Ltd., which is also being resolved under the Insolvency and Bankruptcy Code.

Lenders, however, say that the extent of losses seen in Aircel are a one-off and will not be repeated with RCom. Banks are confident of reasonably high recoveries from RCom over the next few months, said three senior bankers on condition of anonymity. These bankers, however, are unable to put a number to the expected recoveries given that the RCom insolvency process is at an early stage.

According to these bankers, RCom has reasonably strong assets and could attract bidders including Mukesh Ambani’s Reliance Jio Infocomm Ltd.

RCom had debt of over Rs 36,000 crore as on March 2018. This is likely to have gone up to over Rs 40,000 crore now, the three lenders quoted earlier said. Banks involved in the RCom insolvency include State Bank of India, Bank of Baroda, Yes Bank Ltd., IndusInd Bank Ltd., China Development Bank, Industrial & Commercial Bank of China, and 20 other lenders.

Assets With Realisable Value

RCom’s optical fibre, tower, media convergence nodes and wireless spectrum have high realisable value, according to the bankers quoted above. The company also owns real estate assets across Mumbai, Delhi, Chennai and Kolkata, which can help in improving recoveries.

According to the company’s annual report for 2017-18, it has:

• Over 122 MHz of 4G spectrum
• 43,000 tower assets
• 2,80,000 km of optical fibre assets in India, U.S., Europe, Middle East and Asia Pacific region

The first of the three bankers quoted earlier said that the consortium of lenders is confident that RCom will attract many bidders under the IBC process, since chances of challenging a decision under the code would be difficult. The successful bidder would end up owning the company’s assets without any attached liabilities, since all debt-related issues would be resolved under the IBC, this banker said.

The second banker quoted earlier said that lenders are confident of recovering a “reasonable” portion of their debt exposure, provided there are no major delays in resolving the account. In resolution of large insolvency accounts like Bhushan Power and Steel Ltd., Alok Industries Ltd. and Essar Steel Ltd., banks have faced considerable challenges due to judicial delays, the second banker added.