Will $2 billion asset sale provide respite for Anil Ambani?

Chennai: Reliance Group chairman Anil Ambani is reportedly racing against time to sell his companies in order to repay loans in the backdrop of pending debts.

According to reports, the companies that are likely to be sold are Reliance Home Finance (RHFL) and Reliance Commercial Finance (RCFL) limited. The asset sales are likely to cross $2 billion in value as the company’s cash dwindled to Rs 11 crore ($1.6 million) as of March, according to CARE Ratings.

However, Reliance Capital, the parent company, is looking out for investors to save these companies and companies like Blackstone, Carlyle, Brookfield, and Piramal group have shown interest. Reliance capital has 51 per cent shares in RHFL.

CEO of Reliance Capital, Amit Bafna informed that this process will go on for almost two to three months and will improve credit ratings of the company.

Rating agencies including CARE and ICRA reduced the ratings for both firms as the companies are not performing well. Currently, RHFL and RCFL are under a debt of Rs 17,000 crore and Rs 16,000 crore, respectively.

CARE Ratings said in its 18 April statement that despite Rs 14,000 crore of planned divestment, almost all the transactions are behind schedule, while slashing Reliance Capital’s long-term rating to A from A+ and putting it on a “credit watch”.

ICRA, Moody’s local unit, had downgraded the short-term ratings in March, saying the ‘timeliness of receipt of funds’ from divestment “remains critical”. More cuts have followed for other group companies as well with Brickwork Ratings paring it to A+ from AA last month.

Reliance Capital Ltd had largely remained insulated from the distress plaguing the wider conglomerate since the financial services business almost doubled its profit in five years.

The company told exchanges last month that it only has short-term debt of Rs 950 crore, which will get fully repaid by end-September using proceeds from the sale of its stake in the asset management business. The 43 per cent stake was valued at Rs 5,300 crore, it said.

It must be noted that Ambani managed to dispose of the Mumbai power distribution and road assets and many others in telecommunications. The proceedings were scuttled due to regulatory hurdles or legal delays.

The value of Anil’s holdings in companies has plunged to about $120 million from a net worth of $31 billion in 2008. The firms that Anil is about to sell were formed from Reliance Industries Ltd. as part of a 2005 settlement with his older brother, Mukesh Ambani, following the death of their father Dhirubhai Ambani.

There is good too
While Anil Ambani is rushing to sell his companies to escape the deep plunge, Reliance Capital, however, has seen its revenue and profits rise over the past few years. Net income nearly doubled to Rs 1,310 crore in the 12 months through March 2018 from five years ago, while net revenue tripled to Rs 15,870 crore in the same period.

 

The problematic ones
* Reliance Mutual Fund wrote down about $233 million of investments in Reliance Home Finance Ltd. and Reliance Commercial Finance Ltd. last month.

* Reliance Communications is headed for bankruptcy proceedings after it failed to close the sale of its telecom assets and repay lenders.

* Reliance Naval and Engineering Ltd. is till on the ropes while Reliance Power Ltd. has been fighting for higher tariffs to make up for increased costs.

NT Bureau