Debt resolution: Reliance Communication awaits NCLT order on Ericsson plea
RCom and Ericsson have been negotiating a settlement over outstanding payments, and the matter has been sent to NCLT for further action.
Reliance Communications (RCOM) informed stock exchanges that the company is awaiting detailed orders of the National Company Law Tribunal (NCLT), Mumbai, allowing the Ericsson application for admitting it for debt resolution under IBC. The share price of the company has tumbled by nearly 18% on stock exchanges as an outcome of the announcement. RCom and Ericsson have been negotiating a settlement over outstanding payment, and the matter has been sent to NCLT for further action.
After touching intraday low of Rs 10.25 per piece, the share price of RCOM was trading at Rs 10.50 per piece on BSE down by 15.66% at around 1149 hours.
Last year in September, the Sweden-based Ericsson filed a petition before NCLT asking for liquidation of the telecom operator to recover up to Rs 1,150 crore which RCom owed to the company.
Ericsson accused RCom of not paying for the equipment and services for nearly two years and instead only issued a few post-dated cheques.
So far the negotiation between the two has not reached any outcome, which is why NCLT comes into the picture to provide a path to the settlement of outstanding payment.
On April 05, the Supreme Court lifted the stay granted in favor of Ericsson by the Bombay High Court, in relation to asset sales by RCOM.
RCOM said, “Accordingly, there is now no bar in immediately completing the asset sales of spectrum, MCNs and real estate, and the same shall be concluded expeditiously."
On the stay granted by NCLT in favor of minority investors holding approx. 4% shareholding in Reliance Infratel, which is limited to tower and fibre assets, the Hon'ble SC has not made any comments on merits, and has instead only directed RCOM and its lenders to follow due procedure, and file an appeal before the NCLAT, instead of directly approaching the SC.
RCom is currently trying to recover net debt of over Rs 45, 000 crore to stay afloat in the business.
While big brother Mukesh Ambani’s RJio was making headlines with strong performances, the younger brother Anil Ambani’s Reliance Communications recorded 11.38 subscribers leaving the network in the month of February 2018, as per TRAI data.
RCom was worst hit as the company declined by 94.39% in wireless subscriber, followed by Tata, Aircel, Telenor and MTNL which tumbled by 4.43%, 3.09%, 2.50% and 0.26% respectively.
RCOM on Tuesday said, “The Companies will decide the next course of action after studying the NCLT orders.”