Shares of Reliance Communications Ltd (RCom) plumbed the depths on Monday, crashing more than 50 percent on the National Stock Exchange, after the debt-laden company said last week it will move the insolvency tribunal seeking bankruptcy protection.
Rcom shares nosedived to their record low in early trade, falling as much as 54.3 percent to Rs. 5.3 per share. More than 12 crore shares of the Anil Ambani-led company were traded in less than 45 minutes of trade even as investors dumped the telecom stock and ran for cover.
The crisis-hit firm said it was moving for bankruptcy protection after its attempts to pare Rs 42,000 crore debt failed despite attempts over the last 18 months to sell assets and negotiate with the lenders.
"The board noted that, despite the passage of over 18 months, lenders have received zero proceeds from the proposed asset-monetisation plans, and the overall debt-resolution process is yet to make any headway," the company said on Friday.
The latest blow for Rcom was the failure of the plan to sell assets worth Rs 18,000 crore owing to legal hurdles. The beleaguered company also found it hard to bring about an agreement among the lenders over the debt resolution plan. The State Bank of India, China Development Bank, Union Bank, Canara Bank, IDBI Bank and Standard Chartered Bank are among the 40 lenders Rcom owes money.
The board said it now looks at comprehensive debt resolution within the next 270 days. During this period, NCLT will oversee the process to sell RCom assets even as the company is run by interim resolution professionals (IRPs).
Friday's development meant that the plan to sell spectrum and towers to Mukeh Ambani-led Reliance Jio would stand cancelled.
For debt-laden RCom, which decided to wind up its wireless business in December 2017, the sale of spectrum to Mukesh Ambani-controlled Reliance Jio was crucial for survival. The Supreme Court had approved the sale on 30 November subject to conditions. However, protracted legal wrangles delayed the deal, effectively leading the failed firm to choke up finally.
Net loss widens
When the debt resolution process restarts under the interim resolution professionals, Reliance Jio would be able to bid for RCom assets again, at a cheaper price. Thus it turns out that RCom's spectacular undoing is a straightway gain for Reliance Jio.
Early last month, the Supreme Court set the ball rolling in Ericsson's contempt proceedings against Anil Ambani over the non-payment of Rs 550 crore Reliance Communications owes to the Swedish firm.
Meanwhile, the debt-ridden company's net loss widened in the third quarter of FY19. RCom said it incurred a loss of Rs 238 crore on a consolidated basis in the December quarter compared to Rs 130 crore loss year on year.