Bankers unsure of Anil Ambani's debt repayment commitment

With debt to banks and other financial entities mounting, Reliance ADAG chairman Anil Ambani tried to quell fears of the investors and the anxiety of the lenders by saying that the group is fully committed to meet the future debt obligations.

However, bankers are not convinced of the group's repaying capacity. "He made a similar commitment on the repayments for Reliance Communications, which owes a debt of Rs 50,000 crore to a clutch of domestic banks. But no money came forth and he filed for bankruptcy in the National Company Law Tribunal in May," said a banker.

With shares pledged in many of the group companies and with no external liquidity, the company will have to offload stake in group companies.

Ambani added that the group has already repaid debt of Rs 35,000 crore and will make timely payments to pare the remaining debt. However, the company declined to give a break-up of the debt payment or to whom it was repaid. When its energy distribution company Reliance Energy was sold to Adani Group, the company had repaid about Rs 18,000 core of debt to banks and other institutions.

"We are fully committed to meet future debt servicing obligations in a timely manner through further asset monetisation plans, Anil Ambani, Reliance ADAG group chairman, said in a surprise concall called to quell the fears of investors and financial institutions.

He said "rumour mongering, speculation, and bear hammering" resulted in a steep fall in all the Reliance Group company shares over the past few weeks. Ambani said this had "caused grave damage" to all the stakeholders.

Giving a further breakdown of payment from April 1, 2018, to May 31, 2019, Ambani said Rs 25,000 crore had been paid towards principal leading to overall debt reduction and Rs 10,000 crore towards interest payments. Ambani said the company disclosed that the debt servicing payments of Rs 35,000 crore had been made almost entirely from asset monetisation despite a liquidity-starved environment and operational cash flows in an operating environment beset by procedural and regulatory hurdles. He said this amount included debt servicing payments by Reliance Capital Group, Reliance Power group, Reliance Infra group, and their respective affiliates.

"During the last 14 months, lenders from all categories - whether banks, mutual funds, insurance companies, provident funds or NBFCs - had provided zero net additional liquidity or debt to any entity of the Reliance Group," Ambani said. He blamed regulatory institutions and courts for the delay in passing verdicts, which had kept the group from receiving dues of over Rs 30,000 crore.

"To compound matters, the regulatory bodies and courts have not passed any final adjudication orders on claims aggregating to over Rs 30,000 crore that is due for more than 5 - 10 years to various Group companies, especially Reliance Infrastructure and Reliance Power, and their affiliates," said Ambani. He added that final decisions had only been inordinately and repeatedly delayed for one reason or the other.

Reliance Group, he concluded, was committed to transformation and become capital light with bare minimal debt and a higher return on equity.

Shares of most Reliance ADAG Group companies closed higher on BSE after Ambani's statement. Reliance Capital closed at Rs 93.90, up 2.96% higher over the previous close, while Reliance Infrastructure was up 1.17% at Rs 64.95, and Reliance Nippon Life Asset Management Company rose 1.60% to close at Rs 219.70 a share. However, Reliance Naval & Engineering ended 2.62% lower at Rs 6.33 a share.