Anil Ambani Group’s Debt To Fall 60% After Asset Sales
It’s been a narrow escape for Anil Ambani and his group companies. A tidal wave of debt was about to overwhelm them but Ambani was able to sell a few assets just in time, ensuring the Reliance name remains creditworthy.
The younger Ambani brother’s Reliance Group is expected to lower its debt by nearly 60 percent once they complete the sale of assets. The mobile-to-metro conglomerate had a debt of more than Rs 1 lakh crore as of March and an annual interest liability of over Rs 10,000 crore, according to BloombergQuint’s calculations based on company filings. That’s expected to fall to Rs 48,645 crore after the asset sales.
Reliance Communications Ltd. is leading the group’s effort to pare debt by selling telecom towers, spectrum, real estate and DTH business. Reliance Infrastructure Ltd. recently sold its power business in Mumbai to Adani Transmission Ltd.
Here’s a snapshot of how group entities have sold assets:
The company, founded by his brother Mukesh Ambani, and credited with bringing mobile phones to the masses, had a debt of more than Rs 47,000 crore in the previous financial year. The telecom arm, however, is expected to repay nearly Rs 25,000 crore through the sale of spectrum, towers, fibre and other assets. Another Rs 10,000 crore will be repaid through the sale of 125-acre real estate in Navi Mumbai.
Reliance Infrastructure, which is narrowing its focus to defence, engineering and construction businesses, completed the sale of its Mumbai transmission assets to Adani Group.
The deal will turn the company debt-free—for the first time since 2006—by March 2020, Chairman Ambani had told reporters earlier. The sale of the Mumbai unit, which distributes power to more than 3 million consumers, is valued at Rs 18,800 crore.
“It is the largest ever debt-reduction in the infrastructure sector,” Ambani had said. “It is also the largest transaction in the power sector.”
Reliance Naval and Engineering Ltd., which has a total debt of Rs 5,300 crore, sought a debt-resolution plan from the lenders. Though it is now likely to end up in an insolvency resolution process.
The Reliance Infrastructure-controlled company is one of the two private players in India competing for naval orders. The shipbuilder has been reporting losses for at least four years because of a global downturn in the shipbuilding industry and a delay in defence orders.
Reliance Power Ltd. is the only non-banking company of the Anil Ambani group which is yet to face any trouble with debt repayments. Yet, its credit rating was downgraded by ICRA Ltd. because of high leverage and refinancing risk. Though the total debt of Reliance Power—one of India’s largest private sector energy producers—has declined, its ability to service the interest burden has also dropped, according to data compiled by BloombergQuint.
The company also sold stake in one power project for Rs 713 crore.
The Big Picture
After the divestment, Reliance Communications will essentially transform into an enterprise service provider with submarine cable systems. Reliance Infrastructure will manage the defence and infrastructure businesses.
The Anil Ambani Group also has presence in the banking, financial services and insurance sector—Reliance Capital Ltd., Reliance Home Finance Ltd. and Reliance Nippon Asset Management Company Ltd. Reliance Capital, parent of Reliance Home Finance and Reliance Nippon, is looking to list its general insurance business to unlock value.